AI Insights
The case involves Professional Automotives Pvt. Ltd., which appealed against the orders of the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] regarding disallowances made under various heads for the Assessment Years 2013-14 to 2019-20. The main issues revolved around the disallowance of expenses related to Toll & Trip and Repairs & Maintenance, which were claimed to be bogus or excessive. The Tribunal considered the legal provisions, judicial precedents, and the specific circumstances of the case, including the nature of the expenses and the method of their documentation and verification. The Tribunal's decision was influenced by the lack of incriminating material for certain years and the nature of the expenses as either compensatory or penal.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 711372 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-07-2025
Appeal Filed By
Assessee
Order Result
Allowed
Assessment Year
2014-2015
Judgement Text
" vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh]U;kf;d lnL; ,o aJh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihyla-@ITA Nos.809 to 815/JP/2025 fu/kZkj.k o\"kZ@Assessment Years :2013-14 to 2019-20 Professional Automotives Pvt. Ltd. Bahu Plaza, Bahu Plaza, Jammu and Kashmir cuke Vs. ACIT, Central Circle- 1, Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.:AAACP9608E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by :Shri Tarun Mittal, CA jktLo dh vksjls@Revenue by: Shri Ajey Malik, CIT (Th. V.C) lquokbZ dh rkjh[k@Date of Hearing : 03/07/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 23/07/2025 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The present bunch of sevenappeals filed by the assessee aggrieved from the seven different order of the learned Commissioner of Income Tax (Appeal)-4, Jaipur[ for short CIT(A)] for the assessment years 2013-14 to 2019-20 dated 11.04.2025, 08.05.2025, 09.05.2025. The said order of the ld. CIT(A) arise as against the order dated 30.07.2021& 17.08.2021 passed Printed from counselvise.com 2 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT under section 143(3)& 153A r.w.s 143(3)of the Income Tax Act, 1961 [ for short Act ]by ACIT, Central Circle-1, Jaipur [ for short AO ].The details of the order under challenge are as under : ITA no Assessment year Date of order of ld. CIT(A) Date of order of ld. AO Order passed u/s. by ld. AO 815/JP/2025 2019-20 11.04.2025 30.07.2021 143(3) 814/JP/2025 2018-19 09.05.2025 17.08.2021 153A r.w.s. 143(3) 813/JP/2025 2017-18 09.05.2025 30.07.2021 153A r.w.s. 143(3) 812/JP/2025 2016-17 09.05.2025 30.07.2021 153A r.w.s. 143(3) 811/JP/2025 2015-16 09.05.2025 30.07.2021 153A r.w.s. 143(3) 810/JP/2025 2014-15 09.05.2025 30.07.2021 153A r.w.s. 143(3) 809/JP/2025 2013-14 08.05.2025 30.07.2021 153A r.w.s. 143(3) 2. Since the issues involved in these appeals in ITA Nos. 809 to 815/JP/2025 for A.Ys 2013-14 to 2019-20 are inter related, identical on facts and are almost common, except the difference in figure disputed in each year relates to one assessee and therefore, these appeals were heard together with the agreement of both the parties and are being disposed off by this consolidated order. 3. At the outset, the ld. AR has submitted that the matter in ITA No. 815/JP/2025 may be taken as a lead case for discussions as the issues Printed from counselvise.com 3 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount disputedin each year of appeal.The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of the assessee in ITA No. 815/JP/2025 is taken as a lead case. 4. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal for assessment year 2019-20in ITA No. 815/JP/2025 on the following grounds; 1. On the facts and in the circumstances of the case the Ld.CIT(A) has erred in conforming the order passed by Assessing Officer u/s 143(3) rws153A of the Income Tax Act, 1961 even when no incriminating documents whatsoever pertaining to the year under appeal was found as a result of search, and the additions have been made by Ld. AO primarily referring to statements of director Sh. O.P. Gupta, as recorded during search, wherein surrender was obtained from him. Appellant prays that Sh. O.P. Gupta had retracted from his confessional statements, and thus the same could not be relied upon in the absence of any other corroborative evidence, thus the consequent order passed being not in accordance with law, deserves to be quashed. 2. On the facts and in the circumstances of the case and in law, ld.CIT(A) has grossly erred in confirming the action of ld.AO in making disallowance of Rs.4,53,68,624/- u/s 37(1) out of Toll and Trip expenses (Rs.2,14,20,553/-) and Repairs and Maintenance expenses (Rs.2,39,48,071/-), legitimately claimed and supported by necessary evidences arbitrarily. 2.1 That the ld. CIT(A) has further erred in confirming disallowances made by ld.AO, though the bills and vouchers were filed during the course of assessment proceedings and not a single instance or voucher was alleged as bogus by ld.AO nor any contrary evidence was brought on record either by making independent enquiry or out of seized material and unverified observations made by the Investigation team were simply relied upon, thus the disallowances so confirmed, deserves to be deleted. Printed from counselvise.com 4 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT 3. On the facts and in the circumstances of the case and in law, ld.CIT(A) has erred in confirming the disallowance of Rs.2,14,20,553/- out of Toll & Trip Expenses u/s 37(1) of the Income Tax Act, arbitrarily. 3.1 That, ld.CIT(A) has further erred in confirming disallowance out of Toll & Trip expenses, made by ld.AO solely on the basis of statements of director recorded u/s 132(4) during the course of search. Appellant prays that statements were obtained on dotted lines and under duress and therefore cannot be solely relied upon for making disallowance unless the same is supported with corroborative documentary evidences. 3.2. That, ld. CIT(A) has further erred in confirming the disallowance of Rs.2,14,20,553/- made by ld.AO out of Toll & Trip expenses by brushing aside the submission made and evidences adduced. Appellant prays that expenses were incurred wholly and exclusively for the business purposes and therefore deserve to allowed as such. 3.3. That, ld. CIT(A) has further erred in confirming disallowance of Rs.2,14,20,553/-, made by ld.AO purely on estimation basis. Appellant prays that estimation done by ld.AO is absolutely arbitrary and therefore deserves to be deleted. 3.4. That, ld.CIT(A) has further erred in conforming the conclusion drawn by ld.AO that payments made by drivers en-route to RTO officials are penal in nature. Appellant prays that in the type of business the assessee is engaged in, such expenses are inevitable and deserve to be allowed on Commercial expediency ground. 4. Without prejudice to ground of appeal no. 3 to 3.4 and in alternative, w.r.t. details of Toll and Trip expenses, Ld. CIT(A) has grossly erred in issuing directions, that “the appellant is provided opportunity to place on record the exact month wise details along with supporting documents’ copies from with the search and seizure action (no additional evidence is allowed) before the learned AO within one month of passing of this order showing working of the exact amounts on the issues, which shall be considered by the ld. AO after due verification.Appellant prays that such directions per se being beyond jurisdiction, are not in accordance with law. 4.1 That, without prejudice to above, the ld. CIT(A) has erred in giving above referred direction which is not comprehendible, as to what the ld. AO has to do after going through the exact month-wise details and thus direction so given deserves to be ignored and order passed by ld. CIT(A) suffers from serious defects as above. Printed from counselvise.com 5 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT 4.2 That, without prejudice to above, the ld. CIT(A) has erred in finally holding dismissal of the grounds of appeal No. 2 to 2.3 as the same is contradictory to the observation regarding verification and consideration (though such observation being beyond jurisdiction). 5. On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the disallowance of Rs.2,39,48,071/- made by ld.AO out of Repairs & Maintenance expenses, arbitrarily. 5.1 That, ld.CIT(A) has further erred in confirming the disallowance of Rs.2, 39,48,071/- made by ld.AO out of Repairs & Maintenance solely by misinterpreting statements of accountant Sh. Manish Mor and director Sh. O P Gupta recorded during the course of search, wherein it was nowhere mentioned that expenses were not incurred rather it was mentioned that service providers being illiterate, supporting evidences were prepared by assessee (that too from past 5-6 months only). Appellant prays that expenses were actually incurred for the purpose of business and therefore deserve to be allowed as claimed. 5.2 That ld. CIT(A) has further erred in confirming the disallowance though the affidavits of persons confirming the work done and payment received were filed and further these affidavits, remained uncontroverted. 5.3 That, ld. CIT(A) has further erred in not appreciating the fact that bill books of service providers were kept at assessee’s premises as per their instructions as they were not literate nor had facilities to maintain invoices, however assessee being income tax assessee had to maintain proper books of accounts. Appellant prays that such arrangement was merely to facilitate the service providers and to keep proper documentary evidences in support of expenses incurred and therefore no adverse inference be drawn on this basis. 6. Without prejudice to ground of appeal no. 5 to 5.3 and in alternative, w.r.t. details of Repairs and maintenance expenses, Ld. CIT(A) has grossly erred in issuing directions, that “the appellant is provided opportunity to place on record the exact month wise details along with supporting documents’ copies from with the search and seizure action (no additional evidence is allowed) before the learned AO within one month of passing of this order showing working of the exact amounts on the issues, which shall be considered by the ld. AO in giving effect to this order after verification.” Appellant prays that such directions per se is contrary to the facts of the case as complete details related to Repairs and maintenance was already available with ld.AO as part of seized records and there is no further detail sought/ available with assessee which could be furnished by assessee. 6.1. That, without prejudice to above, the ld. CIT(A) has erred in giving above referred direction which is not comprehendible, as to what the ld. AO has to do after going through the exact month-wise details and thus direction so given Printed from counselvise.com 6 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT deserves to be ignored and order passed by ld. CIT(A) suffers from serious defects as above. 6.2. That, without prejudice to above, the ld. CIT(A) has erred in finally holding dismissal of the grounds of appeal No. 3 to 3.3 as the same is contradictory to the observation regarding verification and consideration (though such observation being beyond jurisdiction). 7. On the facts and in the circumstances of the case and in law, ld.CIT(A) has grossly erred in confirming the addition of Rs.26,773/- made by ld.AO u/s 36(1)(va) of the Income Tax Act, arbitrarily. 7.1 That, ld.CIT(A) has further erred in confirming the disallowance of Rs.26,773/- on account of employee’s contribution to PF and ESI, by brushing aside the fact that employee’s contribution was deposited with a short delay from the dates stipulated under the PF/ESI Act and all the sums were deposited before the due dates of filing of Return of Income and were thus allowable in view of legal position as prevailing at the time of filing Return of Income. It is therefore requested that Employee’s contribution to the tune of Rs.26,773/- deserves to be allowed as claimed. 8. On the facts and in the circumstances of the case and in law, ld.AO has grossly erred in initiating the penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961. 9. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal. 5. Succinctly, the facts as culled out from the records are thatsearch and seizure operations under section 132(1) of the Actwere carried out on 16.01.2019 at various premises of Om Agarwal Group, Sawai Madhopur. Consequent to search action, the case of the assessee was centralized under section 127 of the Act, with DCIT, Central Circle-1 Jaipur by an order of the PCIT. Printed from counselvise.com 7 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT 6. The assessee is private limited company engaged in the Transportation of “Four Wheeler vehicles” throughout the country from the point of their manufacturer to the directed destinations. 6.1 The assessee filed regular return u/s 139 of the Act on 31.10.2019 declaring total income of Rs. 7,60,73,270/-.Notice u/s 143(2) of Act was issued on 29/09/2020, which wasduly served upon the assessee. Thereafter, notice u/s 142(1) of the Act was issued on 21/02/2021 askingdetails/explanations. In response to these notices, the assessee submitted requisite details/explanation, which have been examined as noted by the ld. AO. 6.2 During the course of search and seizure operations carried out at the business premises of assessee at Cement Factory Road, Sahu Nagar, Sawai Madhour, various incriminating documents were found & were seized from the above premises. Furtherit was noticed that a lot of bogus expenditure & missing vouchers related to expenses debited in the books of the respective company were found. Whilerecording the statement of Shri Manish Kumar Mor, accountant of the assessee company on 17.01.2019 vide question no. 34 to 39 asked Printed from counselvise.com 8 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT to explain the reasons for claiming bogus expenditure debited in the books of accounts under the head repairs and maintenance. He stated in his statement that bogus bills under the head repairs and maintenance were claimed in the name of 6 parties whose names were reproduced by the ld. AO at page 3 of his order. While search rummaging of office premises, various blank bill books were found and seized as Annexure AS Exhibit-1 to 7 in the name of same persons. The accountant Shri Manish Kumar Mor in his statement further stated that penalty levied by the RTO &Traffic police to the company's vehicles across over in India were settled by the drivers of such vehicle in cash at that moment. The same penalty amount was not debited in the books of account under the head penalty. For adjustment of such expenses, the same were debited in the books under the head Toll & Trip Expenses in the books of M/s Professional Automotive Pvt. Ltd. (PAPL) in various years, Although, receipts of such penalties are annexed by them in their trip related files. Further, he was asked to verify all these expenses, which were debited in the books of account, but he was unable to verify the same. While search proceedings on 26.02.2019, various incriminating documents were found & seized from the business premises of M/s Professional Automotives Pvt. Ltd. situated at Sahu Nagar, Cement Printed from counselvise.com 9 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Factory, Sawai Madhopur, which were annexed as per annexure AS, Ex-1 to 118. All the incriminating documents are related to bills & vouchers related to revenue nature. Further, on verification of such bills & vouchers, it was noticed that most of the vouchers are self-made &seems to be bogus/dummy. The name/business concerns mentioned on some of the bills/vouchers were exactly same, as stated by the accountant of the assessee Firm during the course of initial search proeceedings such as (1) ChhotuMistri (2) New NSE (3) Star Seat Repairing Works (4) Shahnawaj Body Repairing (5) Shahnwaj Body Repairing etc. Further, during the search proceedings all the bill books were seized as documentary evidence, which proves the modus operandi of claiming bogus expenditure by the company. It is pertinent to mention here that bill- book, as seized while initial search proceedings dated 18.01.2019 are partly in the form of blank. On the other hand, partly bills are in the form of an estimation of bill in the name of M/s Professional Automotives Pvt. Ltd. (PAPL) wherein date is not mentioned. Ld. AO noted that it proves that they were producing bogus bills just before initiation of search on dated 16.01.2019 and these incomplete bogus bills were found in the starting of search. Printed from counselvise.com 10 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT To verify the genuineness of such a type of bill-book found from the office premises, the director of assessee company was asked vide Q. No. 6, 7, 8 & 9 on 28.02.2019 to explain the reason as to why the blank bill- book was kept in his office premises. In reply, there to, he had stated that some of the mechanics areilliterate, so the same vouchers in the name of such mechanic/such entities are kept in his possession for making bill against the work done by him. The same bills were made by themselves & thereafter the same bills-book were returned back to such persons. He has also stated that some of the bills were lost by the drivers during the transit period & some of was made as \"kaccha bill\". Therefore, to meet- out/adjustmentofsuch type of expenses, we make these types of provisions. Based on that reply of the director of the company, ld. AO noted that the assessee company involved in making bogus expenses to suppress the actual profit in the case of M/s Professional Automotives Pvt. Ltd. (PAPL). Similarly, on perusal of vouchers, which was debited under the head \"Toll & Trip Expenses in PAPL, it was noticed that various vouchers are related to payments made to RTO & Traffic police across India, in the nature of penalty. The director of the assessee company has stated in his statement that this type of expenses relates to various type of expenses made in cash Printed from counselvise.com 11 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT to RTO & traffic police for charging of fine against motor vehicle Act. The same is not acceptable that penalty levied by the government department is disallowable expenses. However, based on documents found from the premises of assessee company (PAPL), a summarized chart were prepared in different years to find out the disallowable expenses on account of missing vouchers/bogus vouchers under the head \"Repairs & maintenance\" and \"Toll & Trip Expenses\". For this, a data was prepared for a particular month in different years to verify the genuineness of expenses debited under the head \"Repairs & Maintenance\" and \"Toll & Trip Expenses\" in the books of M/s PAPL On the basis of such data, which was prepared on monthly basis, an estimation of amount of disallowable expenses was worked out in particular year under the head \"Repairs & maintenance\" and \"Toll & Trip Expenses\" in the case of M/s PAPL. The same is also making a part of while recording statement of Shri Om Prakash Agarwal(Gupta) vide Q. No. 10 to 11 dated 28.02.2019. On the basis ofthat facts & considering the reply of Shri Om Prakash Agarwal (Gupta), ld. AO noted that the company M/s PAPL is indulged in production of bogus billing of expenditures. Further, various disallowable expenses under the head Toll & Trip and Repair& Maintenance were noticed in the books of M/s Professional Automotives Pvt. Ltd. (PAPL). While search Printed from counselvise.com 12 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT proceedings Shri Om Prakash Agarwal admitted a lump sum disallowance of Rs. 12,00,00,000/- for various years but when the same was compared with the ITR filed in compliance to notice u/s 153A and 139(1) of the Act ld. AO noticed that the same income has not been included while filling the return. 6.3 In the assessment proceeding it was specifically asked for the explanation of the bogus expenses and how the same are offered for taxation in computation of income, vide query letter issued on dated 21/02/2021 which reads as under : \"During the course of search and seizure action in the case of Om Agarwal Group certain incriminating documents were found and seized from the office of Mis Professional Automotives Pvt Ltd., situated at Cement Factory Road, Sahu Nagar, Sawai Madhopur, which were inventorised as various exhibits No. 1 to 7 of Annexure- AS. On perusal of these documents, it is noticed that a lot of bogus expenditure & missing voucliers related to expenses were debited in the books of account under the head Toll & Trip Expenses of this company. Therefore, various disallowable expenses of Rs 11,69,24.472/- u/s 37 of the 17 Act, 1961 were debited under the head Toll and Trip. Disallowable expenses of Rs 2,14,20 553/- (out of Rs 11,69,24,472/-) were debited and offered for taxation for the year under consideration Please explain the working of disallowable expenses of Rs 2,14,20,553/- admitted during the course of search and how the same has been offered for taxation for the year under consideration along with the documentary evidences” 6.4 The assessee was also asked to explain the discrepancies related to expenses of Rs. 7,32,32,126/- on account of missing vouchers//bogus vouchers under the head \"repair and maintenance expenses as under:- \"During the course of search & seizure action in the cases of Om Agarwal Group, certain incriminating documents were found and seized from the office of M/s Printed from counselvise.com 13 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Professional Automotives Pvt. Ltd., situated at Cement Factory Road, Sahu Nagar, Sawai Madhopur, which were inventorised as various exhibits No. 1 to 7 of Annexure-AS. On perusal of these documents, it is noticed that a lot of bogus expenditure & missing vouchers related to expenses were debited in the books of account under the head Repair & Maintenance of this company. Therefore, various disallowable expenses of Rs.7,32,32,126/- were debited under the head Repair & Maintenance Disallowable expenses of Rs.2,39,48,071/-(out of Rs.7,32,32,126/-) were debited for the year under consideration. The nature & source of these expenses on account of missing voucher/bogus voucher under the head Repair & Maintenance of Rs.2,39,48,071/-, may be explained along with documentary evidences. Also show-cause as to why these expenses should not be treated as Undisclosed Income for the year under consideration.\" 6.5 The assessee has submitted his detailed reply/submission on 21.04.2021. In that the assessee contended that the proposal to make the disallowance out of the expenses claimed on account of Toll & Trip Expenses and Repairs & Maintenance expenses solely on the basis of the so-called confessional statements of one of the director of the assessee company Shri Om Prakash Gupta. On that aspect they contended that the search in the case of the assessee was initiated on 16.1.2018 and prohibitory order us 132(3) was placed on 18.1.2019 after extensive search at the business office premises for almost 3 days. Thereafter the director of the assessee company had visited the office of the investigation officer with a request to revoke the prohibitory order and finally after a lapse of more than one month, on 25.02.2019, the proceedings for Sitting the prohibitory order were commenced at around 1.00 in noon which were finally concluded at the late night of 28.2.2019 i.e after more than 2 days during Printed from counselvise.com 14 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT which the various tables were prepared based on the vouchers which were available at the same premises even on 16.1.2019. All this sequence of events clearly indicates the intention of the department to obtain the alleged surrender from the management of the assessee company who had already suffered a lot due to the prohibitory orders at its business/office premises which lasted for more than a month's period. Under this pressure Shri Om Prakash Gupta, director of the assessee company had not objected to the working of the search team and signed on the dotted lines in his statements recorded ls 132(4) started in the morning of 27.2.2019 and finally concluded in the late night of 28.2.2019 wherein the alleged surrender of Rs. 12 crores was obtained from him on account of the legitimate and genuinely incurred business expenses by alleging the same as bogus not allowable. Thus, the surrender was obtain under due pressure and stress as it was started on 16.1.2015 and finally concluded on 28.2.219 after obtaining the alleged surrender of Rs. 12.00 crores. Thattype surrender was not to be obtained as reiterated by the Hon’ble Finance Minister in the Budget Speech of while referring to the simplification of procedure and methods employed during the search and seizure, and during survey by the Income Tax department. Hon’ble Minister stated that hereafter, stocks found during the course of a search and seizure operation Printed from counselvise.com 15 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT will not be seized under any circumstances. Second, no confession shall be obtained during such search and seizure operations.Third no survey operation will be authorized by an officer below the rank of Joint Commissioner of Income Tax. Finally, books of account impounded during survey will not be retained over ten days, without the prior approval of the Chief Commissioner. The said position was further clarified by CBDT vide Circular No. 10 dated 2003, which clearly stated that focus and concentration should be on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments rather than on obtaining confession. The assessee also relied upon the judgment in the case of Tanna And Modi Vs. CIT (SC) 292 ITR 209, Kerala State Industrial Dev. Corpn. Ltd. Vs. CIT (SC), 273 ITR 305 CIT Vs. Durgesh Oil Mills (All), Circular-CBOT- Circular binding on Income Tax Authorities. Records reveals that the search proceedings were commenced on 16.1.2019 simultaneously at the residential premises of the directors of the assessee company as well as business premises of the assessee company which continued without any break upto 18.01.2019 when the prohibitory orders u/s 132(3) were placed and after repeated requests and visits to the office of the Investigation Officer i.e the DDIT (Inv.), Kota, the same were Printed from counselvise.com 16 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT revoked on the late night of 28.02.2019 when the director Shri Om Prakash Gupta had admitted certain expenses as disallowable/bogus. As is evident from the statements of Shri Om Prakash Gupta, he categorically stated that the expenses were genuinely incurred and none of the expenseswas bogus. The admission was made under the continuous pressure of the department and on the threat that the prohibitory order will continue till he surrendered the income as demanded by the department. Accordingly, Shri Om Prakash Gupta in order to resume the business activity at his office at Sawai Madhopur had signed on the dotted lines where he accepted the calculations made by the search team by applying various assumptions, presumptions and hearsay and made the surrender.Further, looking at the entire scenario created and the heat generated as a result of search, in which statements were recorded, i.e. during the search proceedings directors of the firm, many of their staff members were required to be continuously present on the spot and to explain and give clarification on different issues which even were not directly related with them and during which period directors/employees were interrogated on various issues, without allowing them to even carry on routine activities and thus harassing them and putting them to severe physical stress and mental agony. Search officials even did not allow the concernedpersons to read and understand Printed from counselvise.com 17 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT what has been recorded and simply got their signatures on the papers so made, which amounts to violation of human rights, and thus statements so recorded cannot be relied upon. In this regard, reliance is placed on decision of Patna High Court in the case of Bihar Human Rights Commission vs Rajendra Singh.Immediately after conclusion of the search proceedings, the assessee company through its director applied for the copies of said statements along with other seized material which were supplied to them. On receipt of the copies of statements and after in-depth and minute examination thereof, it was observed that many of the replies havenot been property and correctly recorded. Accordingly, when all the facts were correlated with the material available and the books of accounts maintained in the regular course, it was found that none of the expenses were of the nature which could be disallowed u's 37(1) since all of them were incurred under business exigency and wholly and exclusively for the purpose of business. Further the expenses alleged as bogus were also genuinely incurred and the repairs of the vehicles on which such expenses were alleged as bogus were actually carried out and without which the respective vehicle could not even run on the road. Therefore, the assessee company while filing its returns in response to notice uls 153A had not offered any additional income in this regard. The assessee filed an affidavit Printed from counselvise.com 18 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT of Shri Om Prakash Gupta, Director of the company affirming thatfacts and therefore, the so-called confession as made by Shri Om Prakash Gupta in his statements recodedduring the course of search deserves to be ignored and excluded while examining the genuineness of the expenses claimed. The assessee also filed a detailed submission on the merits also contending that the assessee company is engaged in the Transportation of \"Four wheeler vehicles throughout the country from the point of their manufacturer to the directed destinations. In the process, assessee transports vehicles of companies located in North e.g. Maruti, Honda and Tata to the dealers located in eastern, western and Southern parts of country and on return way transports the vehicles of companies located in South Le. Hyundai, Renault, Ford etc. to dealers located in the Northem, western and esteem part. For this purpose, specific contracts are entered into with four wheelers manufacturing companies directly (& not through dealers) for specific duration and entire payment is received through banking channels from the companies after deduction of tax at source as per law. Presently the assessee owns more than 350 boxed trucks of higher capacity which are engaged in the transportation business carry on by the assessee. All the vehicles have two set of drivers along with one helper and they are remunerated by salary which is paid to them on a Printed from counselvise.com 19 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT monthly basis. It is submitted that all the expenses pertaining to a trip, ie. Diesel, Toll tax, RTO expenses, other incidental petty expenses incurred on that trip are debited to Tour and trip expenses. At the time when the trip is started, a Lump sum advance is given to the driver under signed voucher to meet out the journey expenses and the authorization slips are given for topping up of diesel and fuel. For the purposes of accounting, assessee maintains Trip settlement sheets, which contain all the details of trip undertaken, right from vehicle details, i.e ownership of vehicle, vehicle number, trip details ie. the distance traveled, fuel Quantity/status, driver details (ie, name, phone number, license number), advance given to driver, along with all the supporting evidences in respect of expenses incurred by driver, i.e. diesel slips, toll receipts, repairs bills, any other charges paid including the government payments on road. For the control purposes, the management tracks the vehicle by GPS system in place and further the vehicle team is supposed to show the major occurrence on road by showing face time photos of the matter. Vide Question No. 9 of statements of Shri Om Prakash Gupta recorded uls 132(4) on 28.02.2019, explanation was sought from him as to why certain Traffic penalties imposed under Motor Vehicle Act which were also debited to Profit & Loss Account under the head \"Toll & trip be not Printed from counselvise.com 20 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT treated as disallowable expenses in response to which it was submitted that, payment for such expenses were made by drivers on the spot by way of composition fees in order to avoid delay in completing the trip falling which the contractee would levy penalty under contractual obligation which will be much higher than such expenditure. It was also submitted by Shri Om Prakash Gupta that in the nature of business assessee is engaged, such expenses are wholly and exclusively incurred for the purposes of business and are incidental to the nature of business and in most of the cases it is levied by various state transport departments under pressure of revenue collection for the department in that state. However, search officials on the basis of vouchers available at the business premises with each individual tip chart, pertaining to F. Yrs. 2014-15 to 2018-19, noted down details for few months on sample basis and that too without properly considering the nature of the same. Accordingly. expenses debited to Profit & Loss Account under \"Toll &Trip were compared with expenses computed on the basis of vouchers alleged to be in the nature of penalties in arbitrary manner and without considering the business exigency of incurrence of such expenditure. The departmental team thereafter and without having any basis for doing so ESTIMATED the disallowability for all the six years, including year Printed from counselvise.com 21 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT under consideration. Such tables prepared by search officials on estimation basis are reproduced at reply to Question No. 10 of Shri Om Prakash Gupta (page 7 to 9). Whilesearch, such tables were shown to Shri Om Prakash Gupta and his signature were obtained on such sheets that he agreed with such calculations, according to which the penalty payments were estimated at Rs. 11,69,24,472/- for 7 years i.e from F. Yrs. 2012-13 to 2018-19 (Rs.2,14,20,553/-for current year). Similarlythe bills and vouchers for FY 2012-13 and 2013-14 could not be located however, they had seized vouchers for March 2014 (i.e. F. Y. 2013-14) which are available at Exhibits A-107 to A-116. Further based on the figures noted for March 2014, the search officials had proportionately worked out the proportion of disallowable expenses at Rs. 1,69,89,904/- for A.Y. 2014-15. The assessee contended that as regards those bills and vouchers, it was submitted that the same were destroyed due termite and few bills and vouchers were available which were kept separately and after appreciating this fact, the search party has not insisted for production of bill and vouchers for AY 2013-14 however, for AY 2014-15 as submitted above, despite of the availability of the same it was stated that they were not found.It was further submitted that neither any instance of bogus expenditure nor missing vouchers was pointed out by search officials in relation to expenses debited Printed from counselvise.com 22 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT to Profit& Loss Account which could be related to the year under consideration. 6.6 Ld. AO did not considered the reply of the assessee and he based on the statement of the accountant and director of the company and based on the chart prepared by the search team made an addition of Rs. 4,53,68,624/- [ Rs. 2,14,20,553/- under the head toll and trip expenses and Rs. 2,39,48,071 under the repairs and maintenance ]. Ld. AO made disallowance of Rs. 4,680/- on account delayed payment PF. 7. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: Ground No. 1 & 1.1 4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- In this ground of appeal the appellant has made a common submission for different assessment years. In the submissions firstly the appellant has contended against the additions made in the assessment orders and the specific submissions have also been given by the appellant in the respective grounds of appeal against such specificadditions. The contentions of the appellant have been considered in the adjudication of the grounds of appeal against such specific additions. Further, the issue raised by the appellant is that for A.Y. 2013- Printed from counselvise.com 23 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT 14 and 2014-15, case of assessee was selected for scrutiny and assessment was completed us 143(3) and that in assessment so completed for AY 2013-14 and 2014-15, the expenses claimed under the head Trip and Toll expenses and Repairs & Maintenance expenses were not doubted and petty disallowance were made out of other expenses claimed such as office expenses. printing etc. The appellant has further contended that for A.Y. 2015-16 to 2017-18, case was not picked for scrutiny and thus the Return of Income filed by assessee had attained finality. No proceedings relating to the assessment with respect to these assessment years under appeal were pending before the Ld. AO as on the date of search, and therefore, the Ld. AO's jurisdiction u/s 153A was limited only to the material found during the course of search and he could not have made additions/disallowance in the assessments u/s 153A without referring to any incriminating material found / seized during the course of search. It was not permissible for the Ld. AO to make regular scrutiny assessments under the garb of assessment u/s 153A in view of the fact that the return of income filed way back in regular course has attained finality as case was not selected for scrutiny and time for such selection has already lapsed. However these contentions of the appellant are not relevant as during the course of search and seizure action incriminating material was unearthed on the issue of Repairs & Maintenance expenses and on the issue of Toll & Trip Expenses. On the issue of repair and maintenance expenses, bogus bills were found which were prepared by the appellant itselfhowever shown to have been received from the repairing persons. Also the large amount of such expenses were found to be not represented by any bill or voucher. During the search proceedings on 26.02.2019, various incriminating documents were found & seized from the business premises of M/s Professional Automotives Pvt. Ltd. situated at Sahu Nagar, Cement Factory. Sawai Madhopur, which were annexed as per annexure AS, Ex-1 to 118. All the incriminating documents are related to bills & vouchers related to revenue nature. Further, on verification of such bills & vouchers, it was noticed that most of the vouchers are self-made &seems to be bogus/dummy. The name/business concerns mentioned on some of the bills/vouchers were exactly the same, as stated by the accountant of the assessee Firm during the course of initial search proeceedings such as (1) ChhotuMistri (2) New NSE (3) Star Seat Repairing Works (4) Shahnawaj Body Repairing (5) Shahnwaj Body Repairing etc. Further, during the search proceedings all the bill book were seized as a documentary evidences, which proves the modus operandi of claiming bogus expenditure by the company. It is pertinent to mention here that bill-book, as seized during the course of initial search proceedings dated 18.01.2019 are partly in the form of blank. On the other handpartly bills are in the form of estimation of bill in the name of M/s Professional Automotives Pvt. Ltd. PAPL) Printed from counselvise.com 24 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT whein date is not mentioned. It proves that they were producing bogus bills just before initiation of search on dated 16.01.2019 and these incomplete bogus bills were found in the starting of search. Similarly, accountant Shri Manish Kumar Mor also clearly stated in his statement that penalty levied by the RTO &Trafic police to the company's vehicles across over in India were settled by the drivers of such vehicle in cash at that moment. The same penalty amount was not debited in the books of account under the head penalty. For adjustment of such expenses, the same were debited in the books under the head Toll & Trip Expenses in the books of M/s Professional Automotive Pvt. Ltd. (PAPL) in various years. Although, receipts of such penalties are annexed by them in their trip related files. Further, he was asked to verify all these expenses, which were debited in the books of account, but he was unable to verify the same. However, on the basis of documents found from the premise of assessseecompany(PAPL), a summarized chart were prepared in different years to find out the disallowable expenses on account of missing vouchers/bogus vouchers under the head \"Repairs & maintenance\" and \"Toll & Trip Expenses\". For this, a data was prepared for a particular month in different years to verify the genuineness of expenses debited under the head \"Repairs & Maintenance\" and \"Toll & Trip Expenses\" in the books of M/s PAPL. On the basis of such data, which was prepared on monthly basis, an estimation of amount of disallowable expenses was worked out in particular year under the head \"Repairs & maintenance\" and \"Toll & Trip Expenses\" in the case of M/s PAPL. The same is also making a part of while recording statement of Shri Om Prakash Agarwal (Gupta) vide Q. No. 10 to 11 dated28.02.2019. The summarized chart is reproducing as under: - Printed from counselvise.com 25 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Printed from counselvise.com 26 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT The figures of the chart was accepted by the director of the company in the course of search and seizure statement. It was found during the course of search and seizure action that the appellant had claimed excessive repairs and maintenance expenses and the appellant also indulged into manufacturing of bogus bills of repairs and maintenance. Further on the issue of: trip expenses it was found during the course of search and seizure action that disallowable expenses had been claimed as allowable expenses by the appellant and no separate disclosure of expenses of violation of law were not disclosed by the appellant. Accordingly surrender was also made by the appellant during the course of search and seizure proceedings. The surrender was not honoured by the appellant in the return of income. The 'incriminating material' can be in any form such as evidence in the nature of Printed from counselvise.com 27 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT i) a document, content of any document ii) an entry in books of account, iii) an asset, iv) a statement given on oath, v) absence of any fact claimed earlier but coming to notice during search, vi) absence of books being found during search; or vii) absence of the office/ business premises as claimed during returns filed or any other documents, etc. In short, any fact/ evidence which could suggest that the documents/transactions claimed or submitted in any earlier proceedings were not genuine, being only a device/ make belief based on non-existent facts or suppressed/misrepresented facts, would constitute an incriminating material sufficient to make assessment for the purposes of the Act. A mere statement u/s 132(4) is an evidence for making an assessment as held by apex court in B. Kishore Kumar Vs DCIT 234 Taxman 771(SC) and even a statement u/s 132(4) shall also constitute incriminating material to dislodge any earlier finding for the purpose of making an assessment u/s 153A Commissioner of Income-tax, Thichur v. ST. Francis Clay Decor Tiles [2016] 70 taxmann.com 234 (Kerala)/[2016] 240 Taxman 168 (Kerala)/[2016] 385 ITR 624 (Kerala)/[2016] 287 CTR 187 (Kerala) [22-03-2016] \"18. On going through Section 132 of the Income Tax Act, what we find is that if the authority specified therein has reason to believe that any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of the 1961 Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 142 of 1961 Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice etc, etc., can authorise the officers referred therein to enter and search any building etc. etc. Such authorised officer under sub-section (4) of Section 132 may during the course of search or seizure examine on oath any person who is found to be in possession or control of any books of account, document, money, bullion, jewellery or other valuable article or thing and any statement made by such personduring such examination may thereafter be used in evidence in any proceeding under the Indian Income- Printed from counselvise.com 28 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT tax Act, 1922 or under the Act 1961. Therefore, going by the said provision not only the books, documents etc. etc. that are unearthed during the course of search but a statement made by such person during such examination can also be used in evidence in any proceeding under the Income Tax Act, 1961 Thus viewing the provision in such manner, it is an admitted fact that the Managing Partner of the firms in question has given a voluntary statement to the Assessing Officer that there is a undisclosed income of Rs.2.75 Crores, which according to the learned counsel, was retracted by the Managing Partner subsequently. Thusit can be seen that even according to the assessee, there was a disclosure made by giving a statement during the course of search and therefore, the Assessing Officer, by virtue of the power conferred on him under section 153A was competent to issue notice under the said provision and require the assessee firms to furnish the returns as provided thereunder. Neither under section 132 or under section 153A, the phraseology \"incriminating\" is used by the Parliament. Therefore, any material which was unearthed during search operations or any statement made during the course of search by the assessee is a valuable piece of evidence in order to invoke section 153A of the Income Tax Act, 1961\". (Emphasis Supplied) The word \"incriminating\", in the context of section 153A has to be seen as something which can have or may have a bearing on the assessment of correct total income u/s 2(45) as per provisions of the Act. Incriminating material for the purposes of section 153A has to be necessarily construed to be in the nature of a prima facie evidence only (including a circumstantial evidence). Such evidence may or may not turn out to be conclusive evidence after the verification/inquiry during the assessment proceedings. In the context of section 153C, the use of the expression \"books of accounts' u/s 153C again suggests that even the entries recorded in the books of accounts, which have not been correctly recorded or camouflaged would also partake the character of incriminating material, if the same has a bearing on the determination of income which has not been already disclosed in the return filed, if any. The entries in the regular books of accounts would also trigger the assessment u/s 153A/153C, if there is some prima facie evidence that the entry recorded therein is camouflaged, or incorrect, wholly or partially, and such entries have a bearingon determination of total income of such person. Also as per definition in section 271AAB, undisclosed income includes any income based on entry in books of accounts wholly or partly false and would not have been found to be so, had the search not been conducted. This clearly implies that any entry even recorded in the books, which is found to be wholly or Printed from counselvise.com 29 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT partly false along with having a bearing on determination of income based on evidence gathered during search, would also be in the nature of incriminating material. Further, recently introduced section 270A, which is also applicable to search asstt. for AYs other than specified years, mandates to levy penalty even in cases where the expenses had been claimed in the books without any evidence or where the entries recorded in the books were found to be false. This also supports the contention that mere recording of an entry in the books of accounts does not take away its incriminating character, if such entry was without evidence or had been falsely recorded in the books of accounts. The same principle will also hold good for the documents submitted earlier in relation to entries recorded in the books but later found that the documents were not genuine or manipulated or camouflaged. The provisions of section 153A/153C are not the normal assessment provisions like 143(3), rather they are curative provisions to plug the mischief of evasion of taxable income based on evidences found in pursuance to searchand if on account of search, the facts and circumstances suggest that any entry already appearing in books or accepted in earlier assessments based on documents submitted at that point of time, are camouflaged or manipulated or reflected to be in the nature or from a source which is different from the real nature or source as appearing from the evidences found during a subsequent search, then such material/ facts coming to fore now will definitely constitute an incriminating material. In consequence of the same the earlier recorded entries/earlier admitted documents and evidence shall have no force as genuine evidence. If it were held not to be so, then the purpose of 153A would be defeated as it would fail to prevent the mischief, which it sought to prevent just because the entries were already recoded in the books or some documents had already been accepted. Applying the Hayden's Rule of Mischief, the mere fact that such entries are recorded in the books of accounts or some fabricated or colourful documents have already been accepted as correct, will not prevent such material or entry from being incriminating, if the circumstances suggest otherwise. The Hayden's rule of mischief has been judicially accepted and applied by Calcutta High Court in Reckitt Colman of India Ltd. vs. ACIT (2001) 252 ITR 550 (Cal). There is a distinction between a mere change of opinion and a change of opinion based on fresh facts. The latter would imply that the earlier conclusions of the AO were misled by placing evidence on suppression or misrepresentation of material facts. An order passed by the AO relying upon such make belief documents, Printed from counselvise.com 30 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT suppressed or misrepresented facts, which were later found to be not true, shall become void or voidable, as the case may be. Under such circumstances, the acceptance of any claim, relief etc. in any earlier order shall also have no binding force in any subsequent proceedings and the change of opinion would be permissible. The Courts have accepted the principle that any fraud practiced on the court is always a ground for vacating the judgment, as where the court is deceived or misled asto material circumstances, or its process is abused, resulting in the rendition of a judgment, which would not have been given if the whole conduct of the case had been fair\" As per the judgement of the Hon'ble Madras High Court in case of L. Mohanamvs Mohamed Idris on 24 June, 2011 in O.S.A.No.310 of 2010- 19. In support of his contention, the learned senior counsel for the appellant/plaintiff relied on the decision of the Hon'ble Supreme Court in Hamza Haji V. State of Kerala and another reported in (2006) 7 SCC 416, wherein it has been observed that a decision obtained by playing a fraud on Court is liable to be set aside on the basic principle that the party who secured such a decision by fraud cannot be allowed to enjoy its fruits. The learned senior counsel also relied on the observation of the Hon'ble Supreme Court in State of Andhra Pradesh and another Vs. T.Suryachandra Rao reported in (2005) 6 SCC 149 to the effect that the fraud vitiates every solemn Act and fraud and justice never dwell together. In A.V.PapayyaSastry and Others Vs. Govt. Of Andhra Pradesh and others reported in (2007) 4 Supreme Court Cases 221 also, the Hon'ble Supreme Court has observed that fraud vitiates all judicial acts whether in rem or in personam and that a judgment, decree or order obtained by fraud has to be treated as non-est and nullity, whether by the Court of first instance or by the final Court and that the same can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings. In North Eastern Railway Administration, Gorakhpur Vs. Bhagwan Das (dead) By Lrs reported in (2008) 8 Supreme Court Cases 511, the Hon'ble Supreme Court has again reiterated the point that a judgment or decree obtained by fraud either in the first court or in the highest Court, is a nullity in the eye of law. Section 44 of the Evidence Act also enables a party otherwise bound by a previous adjudication to show that it was not final or binding because it isvitiated by fraud. The provision gives jurisdiction and authority to a Court to consider and decide the question whether a prior adjudication is vitiated by fraud. The above propositions of law abundantly make clear that the AO also being a quasi-judicial authority, while functioning under the Act, shall also be bound by similar principles of jurisprudence. For the purposes of assessment of total income u/s 153A also, Printed from counselvise.com 31 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT any findings given in respect of any claim/relief in earlier proceedings shall stand vacated by operation of legal principles where it is found that in earlier proceedings the AO has been misled by suppression or misrepresentation of material facts or by producing only make belief documents, which were not found to be genuine subsequently based on emergence of new facts during enquiries. The view that the AO cannot rescind from accepting the documents admitted earlier is not a gospel truth which can be applied in each and every circumstance. As per the judgement of the Hon'ble Apex court in ITO Vs. Techspan India (P.) Ltd. 92 taxmann.com 361 (SC)- Whether before interfering with proposed re-opening of assessment on ground that same is based only on a change of opinion, Court ought to verify whether assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is basis of alleged escapement of income that was taxable, if assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to Assessing Officer any opinion on questions that are raised in proposed re-assessment proceedings -Held, yes Whether every attempt to bring to tax income that has escaped assessment, cannot be absorbed by judicial Intervention on an assumed change of opinion even in cases where order of assessment does not address itself to a given aspect sought to be examined in re-assessment proceedings -Held, yes Applying the above principle in the present context also, it can be safely concluded that in the absence of any categorical finding on the genuineness of a claim in an earlier assessment having being accepted on make belief documents/evidences only, it cannot be said that the A.O. has expressed any opinion on the correctness or otherwise of the items/entries disclosed in the return of income already filed prior to the search. The judicial view is very clear wherein it has been held that the mere submission of some documents proving identity or bank account, affidavits in contrast to the other evidences suggesting the transaction to be suspicious cannot be accepted to have established the genuineness of transaction. If any earlier finding has been found to be vitiated or incorrect based on material found subsequently, the AOshall have powers to review such findings based on any tangible material coming to his notice, while exercising power of assessment of total income u/s 153A. Further the appellant has not made any specific submissions on this issue with respect to the year under appeal. In view of the above discussion, this ground of appeal is hereby dismissed. Printed from counselvise.com 32 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Ground No. 2 to 2.3 5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- (i) The brief facts as per the assessment order are that with respect to theexpenses debited under the head \"Toll & Trip Expenses\" the accountant Shri Manish Kumar Mor has stated that penalty levied by the RTO & Traffic police to the company's vehicles across over in India were settled by the drivers of such vehicle in cash at that moment. The same penalty amount was not debited in the books of account under the head penalty. For adjustment of such expenses, the same were debited in the books under the head Toll & Trip Expenses in the books of M/s Professional Automotive Pvt. Ltd. (PAPL) in various years. These expenses which were debited in the books of account, but he was unable to verify the same. On perusal of vouchers, which was debited under the head \"Toll & Trip Expenses\" in appellant company, it was noticed that various vouchers are related to payments made to RTO & Traffic police across the India, in the nature of penalty. The director of the assessee company had stated in his statement that this type of expenses are related to various type of expenses made in cash to RTO & traffic police for charging of fine against Motor vehicle Act. (ii) Accordingly, On the basis of documents found from the premise of assessee company(PAPL), a summarized chart were prepared in different years to find out the disallowable expenses on account of missing vouchers/bogus vouchers under the head \"Toll & Trip Expenses\". Printed from counselvise.com 33 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Printed from counselvise.com 34 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Printed from counselvise.com 35 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Printed from counselvise.com 36 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT (iii) During the appellate proceedings, the appellant has submitted that the appellant company is engaged in the Transportation of \"Four wheeler vehicles\" throughout the country and all the expenses pertaining to a trip i.e. Diesel, Toll tax, RTO expenses, other incidental petty expenses incurred on that trip are debited to Toll and trip expenses and payment for such expenses were primarily made by drivers \"on the spot\" by way of composition fees and other taxes etc. However, the survey team as well as Id. AO has not looked into the real nature of expenses incurred and debited under the head \"Toll & Trip Expenses\" and entire expenses paid to various RTOS were treated as Penalties under Motor vehicles Act without analyzing the same precisely. The appellant claimed to have the documents on the basis of which disallowance was made wereprimarily payment to RTO's which can be categorized under following heads: Printed from counselvise.com 37 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT The appellant contention is that except Shasti, all the payments are basically in the nature of technical default which are compensatory in nature and the same can't be termed as offence/violation of law an the payments made to RTOS include Composition fees, Taxes, fee charged due to Overall length and height of Motor Vehicle being higher than permissible limit, driver not in Uniform, defective tail Lamp, Registration mark and Shastietc and that except Shasti, ie Penalty all other payments are in the nature of fees charged for some or the other irregularity, and therefore are allowable u/s 37 (1), being incurred wholly and exclusively for the purpose of business. Surrender during the search action:- It is important to note that during the course of search and seizure action the documents of the appellant were examined and from the same the data in the year wise calculation was prepared which is mentioned in the statement of the appellant was recorded during the course of search and seizure action and in the same the appellant duly accepted additional income on this issue and surrendered the same for the purpose of taxation. The appellant has not placed on record any valid and timely retraction filed by the appellant before the authorities. Thus the appellant is bound by the statement made during the course of search and seizure action. Printed from counselvise.com 38 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Pr. CIT v. Shri RoshanLal Sancheti [IT Appeal No 47 of 2018, dated 30-10-2018], Hon'ble Rajasthan High Court sti IT Appeal No 47 of 2018, dated 2 'This court in CIT, Bikaner v. Ravi Mathur, supra, which judgment has been relied by the ITAT in the present case, after considering catena of previous decisions, held that the statements recorded under section 132(4) of the IT Act have great evidentiary value and they cannot be discarded summarily and cryptic manner, by simply observing that the assessee retracted from his statement. One has to come to a definite finding as to the manner in which the retraction takes place. Such retraction should be made as soon as possible and immediately after such statement has been recorded by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials by way of duly sworn affidavit or statement supported by convincing evidence, stating that the earlier statement was recorded under pressure, coercion or compulsion. We deem it appropriate to reproduce para 15 of the said judgment, which reads thus, \"15. In our view, the statements recorded under section 132(4) have great evidentiary value and it cannot be discarded as in the instant case ITA No. 720/JP/2017 M/s BannalalJat Construction Pvt. Ltd., Bhilwara v. ACIT, Central Circle-Ajmer by the Tribunal in a summary or in a cryptic manner. Statements recorded under section 132(4) cannot be discarded by simply observing thatthe assessee retracted the statements. One has to come to a definite finding as to the manner in which retraction takes place. On perusal of the facts noticed hereinbefore, we have noticed that while the statements were recorded at the time of search on 9-11-1995 and onwards but retraction, is almost after an year and that too when the assessment proceedings were being taken up in November 1996. We may observe that retraction should be made as soon as possible and immediately after such a statement has been recorded, either by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials, either by way of a duly swom affidavit or statements supported by convincing evidence through which an assessee could demonstrate that the statements initially recorded were under pressure/coercion and factually incorrect. In our view, retraction after a sufficient long gap or point of time, as in the instant case, loses its significance and is an afterthought. Once statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording of statements under section 132(4), are true and correct and brings out the correct picture, as by that time the assessee is uninfluenced by external agencies. Thus, whenever an assessee pleads that the statements have been obtained forcefully/by coercion/undue influence without material/contrary to the material, then it should be supported by strong evidence which we have observed hereinbefore. Once a Printed from counselvise.com 39 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT statement is recorded under section 132(4), such a statement can be used as a strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time and in the instant case we notice that the AO in the Assessment Order observes ME TAY \"Regarding the amount of Rs. 44.285 lakhs, it is now contended that the statement u/s 132(4) was not correct and these amounts are in ITA No. 720/JP/2017 M/s Bannalaljat Construction Pvt. Ltd., Bhilwara v. ACIT, Central Circle-Ajmer thousands, not lakhs i.e. it is now attempted to retract from the statements made at the time of S & S operations.\" Therefore, what we gather from the Assessment Order and on perusal of the above finding that the retraction was at the stage when the assessment proceedings were being finalized i.e. almost after a gap of more than an year. Such a so-called retraction in our view is no retraction in law and is simply a self- serving statement without any material. In the above judgement, inter-alia, the following arguments were taken on behalf of the assesse which stand rejected:- \"Per contra, Mr. Prakul Khurana, learned counsel for the respondent-assessee submitted that the surrender was extracted from the assessee by income taxauthorities during the search proceedings by use of coercion, duress and threat, which facts have been explained by the assessee in greater detail in the affidavit of retraction. It is argued that affidavits of Shri Suresh, Shri Ashok Jat and ShriPadam Kumar Jain were also filed, in which they have stated on oath that they did not own any land and therefore there did not arise any question of their accepting any advance from the assessee. Learned counsel referred to Instruction No. 286/2003-IT(Inv.) dated 10.03.2003 issued by the Central Board of Direct Taxes which acknowledges the fact that in certain cases, assessees are forced to disclosed the income during the course of search, seizure and survey operations. It was advised therein that there should be focus and concentration on collection of evidence of income which lead to information of what has not been disclosed or is not likely to be disclosed before the Income Tax Department, and no attempt should be made to obtain confession as to any disclosed income. Circumstances in which the assessee had to give the statements under Section 132(4) and/or under Section 131 of the Act have been explained in the affidavit filed on 20.05.2013. The very fact that the search continued for as long as 36 hours indicates that coercion and undue influence were exercised by the authorities of the appellantdepartment for making surrender. The affidavit filed by the assessee on 20.05.2013 explained in minute details the circumstances which Printed from counselvise.com 40 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT led to surrender and how the surrender was extracted from the assessee from the aforesaid seven papers. The assessee has not brought any evidence on record to prove the facts mentioned by the assessee in the affidavit. The persons whose names were mentioned on the papers seized by the department have also denied any amount having been received by them from the assessee as advance against the sale of the properties/land Learned counsel argued that the Assessing Officer has not given any reason in the assessment order as to why the explanation given by the assessee in the affidavit was not acceptable. Learned CIT(A) has given detailed reasons in respect of each deletion of the addition made by the Assessing Officer. Learned counsel in support of his arguments relied upon the judgment of the Supreme Court in Pullangode Rubber Produce Company Ltd. Vs. State of Kerala & Another, (1973) 91 ITR 0018 (SC) and submitted that the Supreme Court therein held that the admission is an extremely important piece of evidence but it cannot be said that it is conclusive It is open to the assessee who made admission to show that it is incorrect and the assessee should be given proper opportunity to show the correct state of affairs. Reliance is also placed on the judgment of Madras High Court in M. Narayan and Bros. Vs. Assistant Commissioner of Income Tax, Special Investigation Circle, Salem, (2011) 13 Taxmann.com 49 (Madras) wherein retraction made during the course of assessment proceedings was entertained and relief was granted on merits of the explanation. It is argued that additions cannot be made merely on the basis of statements which are subsequently retracted even belatedly as held by Delhi High Court in CIT Vs. Sunil Aggarwal, (2015) 64 Taxmann.com 107 (Delhi). Learned counsel relied on the judgment of this Court in Escorts Heart Institute and ResearchCentre Limited Vs. DCIT (TDS) JP, (2017) 87 Taxmann.com 184 Rajasthan; Commissioner of Income Tax Vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) and argued that if two views are possible, the view in favour of the assessee should be preferred. Reliance is also placed on the judgments in Commissioner of Income Tax Vs. K.Y. Pilliah& Sons, (1967) 63 ITR 411 (SC), Deputy Commissioner of Income Tax Vs. RatanCorpn., (2005) 197 CTR 536 (Gujarat); The Assistant Commissioner of Income Tax, Central Circle, Ajmer Vs. ShriDevendra Kumar Choudhary, 2-S-10 to 2-S-18, BasantVihar, Bhilwara, ITA No. 828/JP/16, Commissioner of Income Tax Vs. Ashok Kumar Soni, (2007) 291, ITR, 172 (Raj.), KailashbenManharlal Chokshi Vs. Commissioner of Income Tax, (2008) 174 Taxman 466 (Gujarat); Commissioner of Income Tax, Central-II, Mumbai Vs. Omprakash K. Jain, (2009) 178 Taxman 179 (Bombay); Mehta Parikh & Co. Vs. Commissioner of Income Tax, (1956) 30 ITR 181 (SC); Shree Ganesh Trading Co. Vs. Commissioner of Income Tax, Dhanbad, (2013) 257 CTR 159 (Jharkhand), Commissioner of Income Tax, Karnataka Vs. ShriRamdas Motor Transport Ltd. (2015) 230 Taxman Printed from counselvise.com 41 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT 187 (Andhra Pradesh), Chetnaben J. Shah Vs. Income Tax Officer, Ward 10(3), (2016) 288 CTR 579 (Gujarat).\" (Emphasis Supplied) The Hon'ble Rajasthan High Court in this case further held as under.- \"In view of the law discussed above, it must be held that statement recorded under Section 132(4) of the Act and later confirmed in statement recorded under Section 131 of the Act, cannot be discarded simply by observing that the assessee has retracted the same because such retraction ought to have been generally made within reasonable time or by filing complaint to superior authorities or otherwise brought to notice of the higher officials by filing duly sworn affidavit or statement supported by convincing evidence. Such a statement when recorded at two stages cannot be discarded summarily in cryptic manner by observing that the assessee in a belatedly filed affidavit has retracted from his statement. Such retraction is required to be made as soon as possible or immediately after the statement of the assessee was recorded. Duration of time when such retraction is made assumes significance and in the present case retraction has been made by the assessee after almost eight months to be precise, 237 days (Emphasis supplied) CIT, Bikaner vs. Shri Ravi Mathur (D.B. Income-tax Appeal No. 67/2002), Hon'ble Rajasthan High Court \"Once a statement is recorded u/s 132(4), such a statement can be used as a strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time.....such a so-called retraction in our view is no retraction in law and is simply a self -serving statement without any material\". Commissioner of Income-tax v. MAC Public Charitable Trust [2022] 144 taxmann.com 54 (Madras)/[2023] 450 ITR 368 (Madras) [31-10-2022] \"63. The statements given to the Assessing officer under section 132 (4) have legal force. Unless the retractions are made within a short span of time, supported by affidavit swearing that the contents are incorrect and it was obtained under force, coercion and by lodging a complaint with higher officials, the same cannot be treated as retracted. This position laid down in catena of decisions by the various High Courts in Lekh Raj Dhunna (supra), Bachittar Singh (supra). Printed from counselvise.com 42 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Rameshchandra& Co. v. CIT[1987] 35 Taxman 153/168 ITR 375 (Bom.), Dr. S.C. Gupta (supra), CIT v. Hotel Meriya [2010] 195 Taxman 459/[2011] 332 ITR 537 (Ker.) O. Abdul Razak (supra).\" (Emphasis Supplied) Commissioner of Income-tax v. Lekh Raj Dhunna [2012] 20 taxmann.com 554 (Punjab & Haryana)/[2012] 344 ITR 352 (Punjab & Haryana)/[2010] 236 CTR 414 (Punjab & Haryana) [29-09-2010] \"15. Having crystalized legal position, it is now apt to delve on the factual situation of the present case. It is not in dispute that the assessee had made a statement under s. 132(4) of the Act whereby a surrender of Rs. 2,00,000 was made. Besides this, the assessee had admitted that he had eamed commission from M/s P.M.S. Enterprises, Phagwara which was not disclosed in the return filed by him. The relevant portion of the statement reads as follows \"I am selling agent of Mis P.M.S. Enterprises, Railway Road, Phagwara and get commission @ 2 per cent on the sales effected through me. I have no other source of income except interest from firm on deposit with the firm. My wife is a housewife and does tailoring work on a very small scale.\" 16. Further, during search, certain sale documents were seized which bore the signatures of the assessee as well. The said documents depicted total sales of Rs. 4,92,03,005 as noticed earlier. 17. Thus, in view of sub-ss. (4) and (4A) of s. 132 of the Act, the AO was justified in drawing presumption against the assessee and had made addition of Rs. 9,00,000 in his income under s. 68 of the Act. The onus was upon the assessee to have produced cogent material to rebut the aforesaid presumption which he had failed to displace. The assessee retracted from the said statement vide letters dt.24th Nov., 1998 and 11th March, 1999 during the course of assessment proceedings. However, no value could be attached thereto in the present case. In case the statement which was made by the assessee at the time of search and seizure was under pressure or due to coercion, the assessee could have retracted from the same at the earliest. No plausible explanation has been furnished as to why the said statement could not be withdrawn earlier. In sucha situation, the authenticity of the statement by virtue of which surrender had been made at the time of search cannot be held to be bad. The Tribunal, thus, erred in concluding otherwise. The Tribunal, therefore, was not justified in reversing the order of the AO which was affirmed by the CIT(A) also.\" Printed from counselvise.com 43 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT (Emphasis supplied) In ManmohansinghVig v Deputy Commissioner of Income Tax, Circle 1(1), (2006) 6 SOT 18 (Mumbai) [07-11-2005), the Hon'ble ITAT while coming to a conclusion as to the admissibility of a retraction made on an affidavit by the assessee, laid out certain reasoning for not admitting the same. The conclusions drawn by the Tribunal gives an insight to ascertain as to what the Courts have regard to, while dealing with retractions and how a retraction should be framed. The relevant extract is given hereunder- 1. What was retracted subsequently was only a denial. No material evidence was furnished so as to discharge onus cast on the assessee by virtue of statement recorded under sections 132(4) and 131(1A). 2 Presumption raised under section 132(4A) is not rebutted by the assessee by submitting cogent evidence. Hence, the statement given under sections 132(4) and 131(1A) hold their evidentiary value. 3 No material has been submitted to show that there was any pressure or coercion was exercised while recording the statements under sections 132(4) and 131(1A). No complaint was filed immediately after search or recording of statement under section 131(1A) to show that there was any pressure or coercion. Statement under section 132(4) was recorded before witnesses. Hence, there is a presumption that there was no pressure/coercion unless proved. 4 Disclosure was enhanced during statement under section 131(1A) as compared to be given under section 132(4). Hence, the theory of pressure or coercion applied during recording of statement under section 132(4) is not acceptable. 5. The assessee is silent for about 11 months. No letter/correspondence was sent immediately after recording of statement under section 132(4). Hence, theory of pressure or coercion is only an after- thought. 6. Disclosure of several items were based on documents found in the search. These documents were explained under sections 132(4) and 131(1A). Hence, there is a strong reason to believe that statement under section 132(4)/131(1A) revealcorrect state of affairs and retraction has to be ignored.\" In view of the above discussion the addition made in the assessment order is liable to be confirmed. Without prejudice:- Printed from counselvise.com 44 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT (iv) In order to verify the contention of the appellant, that the expenses debited under the head \"Toll & Trip Expenses\", are allowable or not as per the provisions of section 37 of the Income Tax Act, 1961, the relevant provision of section 37 are reproduced hereunder- \"37. (1) Any expenditure(not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head \"Profits and gains of business or profession\" Explanation 1-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. Explanation 2-For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession (Explanation 3-For the removal of doubts, it is hereby clarified that the expression \"expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law\" under Explanation 1, shall include and shall be deemed to have always included the expenditure incurred by an assessee- (i) for any purpose which is an offence under, or which is prohibited by, any law for the time being in force, in India or outside India or (ii) to provide any benefit or perquisite, in whatever form, to a person, whether or not carrying on a business or exercising a profession, and acceptance of such benefit or perquisite by such person is in violation of any law or rule or regulation or guideline as the case may be, for the time being in force, governing the conduct of such person or (ii) to compound an offence under any law for the time being in force, in India or 231 outside India]] (2) [*] Printed from counselvise.com 45 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT (28) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party. (3) [*] (3A) [ (3B) (3C) (3D) [ (4) (5) As per section 37 of the Act, any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head 'Profit and gains of business or profession\". However this is subject to the following exceptions which are relevant for the adjudication of the present issue at hand- expenditure incurred for any purpose which is an offunge expenditure incurred for any purpose which is prohibited by lnw thus in the present case the appellant is required to show that not only that the expenditure was incurred wholly and exclusively for the purpose of business but also required to prove that same was not incurred for any purpose which is an offence and also required to prove that the expenditure was not incurred for any purpose prohibited by law. which is (v) In the present case the core accepted fact of the case is that the appellant has paid traffic challans. These challans are in the nature of payment for the violation of provisions of Motor Vehicles Act. The director of the company also stated in the statement that for the purpose of early settlement of the issue the payment has been made in the form of composition fee. Thus due to the violation of the law there was a likelihood of the impounding of the vehicle of the appellant however for the early settlement of the matter composition fees was paid. Printed from counselvise.com 46 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT It is also to be seen from the language of the law that the two scenarios of purpose which is an offence and purpose which is prohibited by law have been included separately and specifically in the exception explanation of the law which shows that both are to be given separate meaning and separate implications. It is important to note that the act or purpose which is prohibited by law but which is not an offence is also an exception and thus any expenditure for any purpose which is prohibited by law and even though the impugned purpose may not be offence even then such expenditure is liable to be disallowed. The appellant has contended in the submission is that only the \"shasti\" or the penalty could be disallowed and not the other payments of traffic challans. The appellant has restricted the submissions to the issue of purpose which is an offence' in however not address the issue of expenditure for the purpose which is prohibited by law and even though may not be an offence. Thus even the payments which are for violation of law and may not be penalty even then the same is not allowable as deduction. However, even otherwise, in the present case it is noticed that all the payments by the appellant are in the nature of payments for the purpose which is an offence. Judgements distinguished:- (vi) Thus ratio of a judgement relied upon by appellant and which directly or indirectly is pertaining to the period before the impugned Explanation 1 in Section 37(1) which provides a deeming provision - was not in existence is not applicable to the present case. The judgement in the case of Prakash Cotton Mills (P.) Ltd. v. Commissioner of Income-tax [1993] 67 Taxman 546 (SC)/[1993] 201 ITR 684 (SC)/[1993] 111 CTR 389 (SC)[06 04-1993] was rendered when the impugned Explanation 1 in Section 37(1) which provides a deeming provision was not in existence. Further the judgement pertains to the issue of interest and damages and does not pertain to the issue of 'offence' and 'compounding' and 'punishment. Thus any further judgement relied upon by the appellant which relies upon the judgement in the case of Prakash Cotton Mills (supra) is not applicable to present set of the facts and to the year under appeal. Similarly, the judgement in the case of CIT v. Lokenath& Co. (Construction) [1984] 147 624/17, Taxman 209cannot be of any assistance to the assessee to support his case as the said decision was rendered prior to amendment to section 37 of the Act whereby the above referred Explanation 1 was incorporated. Printed from counselvise.com 47 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT It has been held by the Hon'ble Supreme Court in the case of Commissioner of Income-tax vs. Prakash Chand Lunia (D) [2023] 149 taxmann.com 416 (SC)/[2023] 293 Taxman 229 (SC)/[2023] 454 ITR 61 (SC)[24-04-2023) as under- 26. On the abovesaid analysis, the following conclusions are arrived at: V. The decisions of this Court in Piara Singh case (supra), and Dr. T.A. Quereshi case (supra), do not lay down correct law in light of the decision of this Court in Haji Aziz & Abdul Shakoor Bros case (supra),and the insertion of Explanation 1 to section 37. In view of the above judgement of Hon'ble Supreme Court, it is respectfully stated that the ratio of the judgements which directly or indirectly rely upon the judgements of CIT v. Piara Singh [1980] 3 Taxman 67/124 ITR 40 (SC) and Dr. T.A. Quereshi v CIT [2006] 157 Taxman 514/287 ITR 547 (SC) is not applicable. In the above case the Hon'ble Supreme Court has reiterated the Abdul Shakoor Bros case (supra) (vii) The judgement in the case of Commissioner of Income-tax-II, Ludhiana v. Hero Cycles Ltd. [2009] 178 Taxman 484 (Punjab & Haryana) [09-12-2008] is on the issue of that there is no \"deliberate violation of law and it was a case of \"innocent violation\". Apparently the assessee in that case drew extra power than the permitted and the same was found to be innocent and not deliberate. However in the present case the facts are different as overloading and over sizing and violation of security norms etc. is not innocent violation. These are in the knowledge of the appellant and its team throughout the entire journey and the same is continued and the same is also repeated in other vehicles and in other journeys. Further in the present case there is judgement of honourable Supreme Court in ParmajitBhasin v. Union of India AIR 2006 SC 440 which specifically holds that the overloading in a vehicle cannot be continued even after payment of compounding or composition. (viii) It is held in the case of M/s Taurian Iron & Steel Co vs ACIT, ITA No. 847 & 1613/M/2010 that \"Thus, it is obvious from the notification of Ministry of Railways dated 23.12.2005 that the railway authorities do allow overloading of its rake and it charges 2 or 3 times the freight rate applicable to that commodity as punitive charges. Though the words used in the notification are punitive charges' the charges levied by the Indian Railways for carrying the goods in its rake are permitted by Railway authorities itself and the punitive charges are computed as 2 times or 3 times of the freight rates. The punitive charges levied by Railways, in accordance with the notification of Ministry of Railways dated 23.12.2005, for carrying goods in its rakes are not for any purpose which is an offense or which is Printed from counselvise.com 48 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT prohibited by law'. As a matter of fact, the Indian Railways itself permits carrying weight load beyond the permissible carrying capacity subject to payment of higher rate of freight by 2 times or 3 times. Though the words are 'punitive charges', they are payment which are neither an offense nor is prohibited by the law rather the payment is in accordance with the law as provided in the notification of Ministry of Railways dated 23.12.2005 The discussion in the above judgement pertains to the Notification issued by Ministry of Railways and does not refer to the law made by the Parliament and there is no adjudication in this regard. Further the judgement heavily refers to the Notificationprovision that Indian Railways itself permits carrying weight load beyond the permissible carrying capacity subject to payment of higher rate of freight by 2 times or 3 times. In the above judgement the issue is regarding the higher freight and not of fine or traffic challan. Whereas in the present case in the present appeal, the issue is regarding the violation of law of Motor Vehicles Act and there is no specific provision in the law providing the permission for carrying the overweight vehicle after paying the higher freight. And further that it has been held by the honourable Supreme Court in ParmajitBhasin v. Union of India AIR 2006 SC 440 that \"Section 200 does not in any way authorize the State Government to permit the excess weight to be carried when on various inspection/detection it is noticed that there is carriage of load beyond the permissible limit and that the overweight items have to be immediately removed and \"If permitted to be continued, it would amount to fresh commission of the offence for which the compounding was done\". Thus being different in terms of facts and law, the above judgement in the case of Taurian Iron & Steel (supra) and judgements which relies upon the judgement are not applicable to the present case. (ix) The appellant has relied upon the judgements of Hon'ble ITAT in support of the contentions made in the appeal. In the judgements the appellant has cited only one judgement of Hon'ble ITAT Jaipur Bench in the case of Vishal Chemtrade (P) Ltd. vs The ACIT Circle-1 Kota in ITA No 507/JP/2012. In this judgement the order is based on the judgement in the case of Agrawal Roadlines (P.) Ltd. v. Deputy Commissioner of Income-tax (2011) 7 ITR(T) 576 (Ahmedabad - ITAT)/[2011] 44 SOT 40 (Ahmedabad - ITAT) (URO)/[2010] 129 TTJ 49 (Ahmedabad - ITAT) [18-09-2009] Judgements relied It has been held by the Hon'ble ITAT in the case of Agrawal Roadlines (P.) Ltd. v. Deputy Commissioner of Income-tax [2011] 7 ITR(T) 576 (Ahmedabad Printed from counselvise.com 49 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT ITAT)/[2011] 44 SOT 40 (Ahmedabad - ITAT) (URO)/[2010] 129 TTJ 49 (Ahmedabad- ITAT)[18-09-2009] as under:- \"10. We have heard the learned representatives of both the parties at length and have also perused the materials available on record. It is relevant to state that ShriTusharHemani, learned counsel for the assessee reiterated the submissions made before the lower authorities. He further submitted that in assessee's own case wherein under identical circumstances, the CIT(A)-IV, Ahmedabad vide his order dated 25-10-2007 has allowed the appeal of the assessee for assessment year 2004-05. He further submitted that the order of the CIT(A) for assessment year 2004-05 has become final and therefore, the CIT(A) should have followed the order of his predecessor while deciding theissue. On the other hand, Shri M.C. Pandit, learned Departmental Representative submitted that the facts of the present year are entirely different and, therefore, the CIT(A) was justified in not following the order of his predecessor passed in the assessee's case for assessment year 2004 05. We have perused the reply of the assessee dated 11- 5-2007 submitted before the Assessing Officer. The contention of the assessee that penalty is not levied in each and every case, moreover the assessee being engaged in the business of transportation of liquid cargo chances of overloading was not frequent. Further, the assessee also submitted that this expenditure is incurred in the normal course of business and corresponding income out of carrying of overload was subjected to tax as the party was billed as per tonnage carried. There is no dispute that the Government of Gujarat had introduced a scheme of \"Gold Card\" to carry overload on payment of additional fees fixed for that Gold Card. We find that such compensatory fees were being paid to various RTO authorities that entitled the transporters to carry overload on payment of such compensation fees to the final destination without stopping them to unload the excess weightage. In our view, if these fees were penal in nature then RTO authorities would have recovered the amount from the transporters and unloaded the excess load. In our considered view, the authorities below have not correctly appreciated the facts of the present case. In fact, they have grievously erred in observing that \"scheme of Gold Card introduced by the Government of Gujarat entitled the transport carriers to carry overload by payment of additional fees was strange in a way there is no Government machinery would encourage violation of infringement of legal provisions. Both the authorities below have not appreciated the appellate order for assessment year 2004-05 wherein the CIT(A) has discussed the judgment of the Hon'ble Supreme Court in the case of ParmajitBhasin (supra) as well as the provisions of section 194 of the Motor Vehicles Act, 1988. In our considered view, the judgment of the Hon'ble Supreme Court in the case of transporters dated 9-11-2005 is operative from the date of the judgment. Here, we are concerned with the assessment year 2005-06 and the Printed from counselvise.com 50 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT return of income was filed on 30-10-2005 i.e., much before the date of the judgment passed in the case of ParmajitBhasin(supra). In fact, the decision of the Hon'ble Supreme Court (supra) was applicable from 9-11-2005 i.e., from the assessment year 2006-07 and hence not applicable to the facts of the present year. The Hon'ble Supreme Court held that notifications issued by the State Governments permitting to carry excess weight after giving effect to section 194 of the Motor Vehicles Act has no validity. In this judgment, the Hon'ble Supreme Court directed the State Governments to withdraw the notification forthwith. As we have already stated hereinabove that the State Government of Gujarat had introduced a scheme of Gold Card which entitled the holder of the card to carry overload on payment of additional fees fixed for that Gold Card. Such compensatory fees were being paid to various RTO authorities that permitted the transporters to carry overload on payment of such compensation fees to final destination without stopping them to unload the excess weight. In Our considered view, payment of fine towards carrying excess load cannot fall into the category either of an offence or infringement of law. It is evident from the record that on payment of additional amount already fixed by RTOs, they have allowed vehicles to move further which itself shows that amount collected by the RTOS was not payment towards infringement of law but in the nature of compensation. It is pertinent to state here that Government of Gujarat has allowed to carry such excess load and collected only compensatory amount from the assessee which cannot be termed as payment towards infringement of law. It is also relevant to state that laws of State Government allowed the transporters to carry excess loadin vehicles in relevant years and hence such payment is not in violation of any law. Thus, considering the entire facts and circumstances of the present case, we are of the considered view that payment of penalty for excess load carried was not for infringement of law but in the nature of compensation in the business activities of transportation of goods\" In the above judgement, the Hon'ble ITAT has observed that the judgement of Hon'ble Supreme Court in the case of ParmajitBhasin v. Union of India AIR 2006 SC 440 regarding the transporters dated 9-11-2005 is operative from the date of the judgment. Here, the concerned assessment year was 2005-06 and the return of income was filed on 30-10-2005 i.e., much before the date of the judgment passed in the case of ParmajitBhasin (supra). In fact, the decision of the Hon'ble Supreme Court (supra) was applicable from 9-11-2005 i.e., from the assessment year 2006-07 and hence not applicable to the facts of the present year. In the case of the appellant, the years being much later than the AY 2006-07, thus the judgement of Hon'ble Supreme Court in the case of ParmajitBhasin (supra) is applicable to the cases of the appellant. Thus going by the ratio of the judgement Printed from counselvise.com 51 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT in the case of Agrawal Roadlines (supra) the addition is liable to be sustained in the hands of the appellant. (x) The Hon'ble Supreme Court in the case of ParmajitBhasin v. Union of India AIR 2006 SC 440has held as under- Section 200 does not in any way authorize the State Government to permit the excess weight to be carried when on various inspection/detection it is noticed that there is carriage of load beyond the permissible limit. It only gives an opportunity of compounding so that instead of the amounts fixed, lesser amounts can be accepted by the authorised officers. The intention of uploading the excess weight is apparent from a bare reading of the Section 194(1). The liability to pay charge for uploading of the excess load is fixed on one who drives a vehicle or causes a motor vehicle to be driven in contravention of the provisions of Sections 113, 114 and 115. It is to be noted that compounding can be done either before or after the institution of the prosecution in respect of the enumerated offences. Any notification which runs counter to the clear import of Section 194 has no validity. As rightly submitted by learned counsel for the petitioners after compounding the excess load, same cannot be permitted to be carried in the concerned vehicle. Such carriage would amount to infraction of Section 113 of the Act. The object for which the maximum permissible weights have been fixed is crystal clear. On a perusal of the provisionsit is clear that the maximum gross weight (in short 'GVB') of the trucks is 16.2 tonnes which enables loading of about 9 tonnes. The load rating is primarily based on the road design, specifications of Indian roads. Rule 95(2) of the Central Motor Vehicles Rules, 1989 (in short 'the Central Rules\") prescribes the principles which cover the fixation of GVB of the vehicles. The same reads as follows. \"Rule 95(2) The maximum gross vehicle weight and the maximum safe axle weight of each axle of a vehicle shall, having regard to the size, nature and number of types and maximum weight permitted to be carries by the types as per sub-rule (1), bei Vehicle rating of the gross vehicle weight and axel weight respectively as duly certified by the testing agencies for compliance of the rule 126, or in the maximum vehicle weight and maximum safe axle weight of each vehicle respectively as notified by the Central Government, or ill the maximum total load permitted to be carned by the tyre as specified in sub-rule (1) for the size and the number of the tyres fitted on the axles (s) of the vehicle. Whichever is less: Printed from counselvise.com 52 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Provided that the maximum gross vehicle weight in respect of all vehicles, including multi axle vehicles not be more than the sum total of all the maximum safe axle weights put together.\" The Government of India had also fixed GVB for different categories of vehicles. Reference may be made to notifications dated 18th October, 1996 (no. SO728(E) and 26th May, 2000 (no. SO517E) issued by the Ministry of Surface Transport (Department of Road Transport and Highways) (Transport Wing). It is apparent from the reply filed by the Union of India that overloading causes significant damage to the road surface and also cause pollution through auto emissions. Even overloaded vehicles are safety hazards not only for themselves, but also forother road users. It is pointed out that since the responsibility of enforcing of the provisions of the Act and the Central Rules is that of the State Government they have been advised by the Central Government to scrupulously enforce the provisions of the Act and the Central Rules. It appears that the matter was discussed at the 30th meeting of the Transport Development Council where the following decisions were taken Learned counsel appearing for the States submitted that the system of issuing cards/passes has been discontinued. However, it was submitted that offloading excess weight from large number of vehicles creates traffic problems and several other practical problems which according to them need to be addressed. It is to be noted that the constitutional validity of Section 194 and 200 were challenged. It was noted in P. RatnakarRao and others V. Govt. Of A.P. and others (1996 (5) SCC 359) that the discretion given under Section 200(1) to the State Government to prescribe maximum rates for compounding the offence is not unguided, uncanalised and arbitrary. It was, inter alia, held as follows: ……………….. ………………. It is indisputable that the power of compounding vests with the State Government, but the notification issued in that regard cannot authorize continuation of the offence which is permitted to be compounded by payments of the amounts fixed. If permitted to be continued, it would amount to fresh commission of the offence for which the compounding was done. The State Governments which have not yet withdrawn the notifications shall do it forthwith. So far as the practical difficulties highlighted are concerned, it is for the State Governments concerned to make necessary arrangements to ensure that the difficulties highlighted can be suitably Printed from counselvise.com 53 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT remedied by the State Government themselves without in any way overstepping statutory prescriptions.\" (emphasis supplied) (xi) Reference is further made to the judgement of Hon'ble Delhi High Court in the case of Time incorporated vsLokesh Srivastava (2006) 131 Company case 198 (Delhi). In this case it has been observed that the punitive damages are awarded forthe purpose of providing relief to the overloaded Justice delivery system by providing a civil alterative to criminal prosecution of minor crimes. The traffic challans in the present case are for offences for infringement of law falling within the ambit of Explanation to section 37(1) of the Act. It is held by the Hon'ble Kerala High Court in the case of Commissioner of Income-tax v. Mamta Enterprises [2004] 135 Taxman 393 (Karnataka)/[2004] 266 ITR 356 (Karnataka)/[2004] 187 CTR 414 (Karnataka) [30-10-2003] as under- \"When the section itself declares the expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure, it is not possible to take the view that the expenditure incurred for compounding of the offence should be allowed. When the section is clear and unambiguous, it is not permissible for the Courts to stretch the meaning attached to the provision of law to extend the benefit to a person who violates the law or the Regulations/Rules made by the Corporation or the Municipal Authorities with impunity.\" In the aforesaid case, compounding charges for unauthorized construction were paid for regularization on permission of competent authority and the deduction of the same was claimed. The Hon'ble Karnataka High Court held that the compounding fee was expenditure incurred to pay the penalty and was therefore hit by the provision of Explanation to section 37(1) of the Act. In this case the issue the disallowance was upheld even though the competent authority had allowed and regularized the unauthorized construction. Whereas in the present case the applicable law is that as it has been held by the honourable Supreme Court in ParmajitBhasin v. Union of India AIR 2006 SC 440 that \"Section 200 does not in any way authorize the State Government to permit the excess weight to be carried when on various inspection/detection it is noticed that there is carriage of load beyond the permissible limit and that the overweight items have to be immediately removed and \"If permitted to be continued, it would amount to fresh commission of the offence for which the compounding was done\". Printed from counselvise.com 54 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Similar view has been taken in Millennia Developers (P.) Ltd. vs. Deputy Commissioner of Income-tax [2010] 188 Taxman 388 (Karnataka)/[2010] 322 ITR 401 (Karnataka)/[2010] 231 CTR 401 (Karnataka) [19-01-2010]. The judgement in the case of Mamta Enterprises (supra) has also been relied upon /followed in the case of Nahar Spinning Mills Ltd. vs. Commissioner of Income-tax, Ludhiana [2014] 49 taxmann.com 565 (Punjab & Haryana)/[2014] 226 Taxman 364 (Punjab & Haryana)[28-07-2014) on the issue of amount paid by assessee to Municipal Corporation on account of compounding fee as compensation for condoning deviations from original sanctioned plan. It has been held by the Hon'ble Punjab and Haryana High Court [Full Bench] in the case of Jamna Auto Industries vs. Commissioner of Income-tax [2008] 167 Taxman 192 (Punjab & Haryana)/[2008] 299 ITR 92 (Punjab & Haryana)/[2008] 214 CTR 649 (Punjab & Haryana) [30-01-2008] as under:- 12. Whenever certain damages are to be paid by an assessee for the breach of a contract, such damages are treated to be normal incidences of business. For allowability as a deduction, a claim for damages is to be tested on the touchstone of the provisions of section 37(1) of the Act. Where an assessee has to pay damages to the other party for the failure to fulfil the contract entered into by him in the ordinary course of his business, the amount of damages so paid is an allowable deduction if it is in the ordinary course of the business, and is not opposed to the public policy 13. A penalty imposed for breach of any law during the course of trade, etc., cannot be described as a commercial loss. If an assessee whileconducting his business has acted in an unlawful manner which has rendered him liable to penalty, the sum so paid cannot be claimed as a deductible expense. Infraction of the law is not a normal incident of business and, therefore, no expense which is paid by way of penalty for a breach of law is admissible deduction. In cases where a penalty has to be incurred, for the reason of the assessee having carried on business in an unlawful manner or in contravention of certain rules and regulations, such penalty could not be regarded as 'wholly and exclusively laid out for the purposes of business as the expense has not been necessitated by the business but by the conduct of the assessee in trying to carry out the business in an unlawful manner. Under section 37(1), only that portion of such payment having composite nature which is attributable to its compensatory character for payment as damages is to be allowed as a deduction. The other portion which is attributable to its penalty nature cannot be allowed as a deduction under section 37(1) because such payment is for infraction of law. Printed from counselvise.com 55 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT (emphasis supplied) Reference is also made to the decision of the Hon'ble Supreme Court in the case ofHaji Aziz and Abdul Shakoor Bros. vs. Commissioner of Income-tax [1961] 41 ITR 350 (SC)[24-11-1960]. In this case fine paid to customs authorities for release of confiscated goods imported contrary to law was held to be not allowable as deduction u/s 37(1) of the Act. It is important to note that the judgement in the case of Haji Aziz (supra) was rendered by the honourable Supreme Court in the year even when the impugned Explanation of Section 37(1) which provides for the deeming provisions for the disallowance - was not on the statute. The scope of disallowance has a significantly increased after the insertion of this deeming explanation. Further as it has been held in the case of Upper Doab Sugar Mills Ltd. v. Commissioner of Income-tax [1979] 116 ITR 928 (Allahabad) [04-01-1978] that where the amounts were paid as penalty for the delay made by the assessee in the payment of sugarcane cess and purchase-tax. Mahabir Sugar Mills (Pvt.) Ltd. v. CIT [1979] 71 ITR87 (All) held that penalty payable under 3(5) of the Sugarcane Cess Act was a penalty for making default in the payment of arrears of sugarcane cess levied under the said Act. It was a criminal liability and was not a permissible deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922. Further the Supreme Court in the case of Haji Aziz and Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350, held that no expenses which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid for the purpose of the business. It has been held in the case of Commissioner of Income-tax, Bangalore vs. Jayaram Metal Industries [2007] 158 Taxman 169 (Karnataka)/[2006] 286 ITR 403 (Karnataka)/[2006] 204 CTR 447 (Karnataka) [07-07-2006] that that violation of a statute has to be curbed as otherwise violation would be a premium for violators for the purpose of tax benefits On the issue of meaning of 'prohibited by law, it has been observed by the Hon'ble Supreme Court in the case of Apex Laboratories (P.) Ltd. v. Deputy Commissioner of Income-tax LTU[2022] 135 taxmann.com 286 (SC)/[2022] 286 Taxman 200 (SC)/[2022] 442 ITR 1 (SC) [22-02-2022] as under- 35. In BiharilalJaiswal v. CIT [1995] Supp (5) SCR 285, the issue of what is \"prohibited by law\" was considered by this Court, in the context of interpretation of a condition in a statutory license (for vending liquor) which prohibited transfer of the license by way of sub-letting or entering into a partnership agreement. While Printed from counselvise.com 56 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT dealing with the recognition of such a partnership under the IT Act, this Court held that allowing the same would attract the very mischief sought to be avoided: \"This object will be defeated if the licencee is permitted to bring in strangersinto the business, which would mean that instead of the licencee carrying on the business, it would be carried on by others a situation not conducive to effective implementation of the excise law and consequently deleterious to public interest. It is for this very reason that transfer or subletting of licence is uniformly prohibited by several State Excise enactments. It, therefore, follows that any agreement whereunder the licence is transferred, sub-let or a partnership is entered into with respect to the privilege/business under the said licence, contrary to the prohibition contained in the relevant excise enactment, is an agreement prohibited by law. The object of such an agreement must be held to be of such a nature that if permitted it would defeat the provisions of the excise law within the meaning of Section 23 of the Contract Act. Such an agreement is declared by Section 23 to be unlawful and vold. The question is whether such an unlawful or void partnership can be treated as a genuine partnership within the meaning of Section 185(1) and whether registration can be granted to such a partnership under the provisions of the Income-tax Act and the Rules made thereunder. We think not. When the law prohibits the entering into a particular partnership agreement, there can be in law no partnership agreement of that nature. The question of such an agreement being genuine cannot, therefore, arise It is also a known principle that what cannot be done directly, cannot be achieved Indirectly. As was said in Fox v. Bishop of Chester [1824] 2 BFC 635 Jagir Singh v. Raubir Singh (1999) 2 SCR 282 that it is a \"Well-known principle of law that the provisions of an Act of Parliament shall not be evaded by shift or contrivance And that \"To carry out effectually the object of a Statute, it must be construed as to as defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined\" This Court, in an appeal arising from an action for specific performance, in G.T. Girish v. Y. SubbaRaju 2022 SCC Online SC 60, held that giving the relief would imply doing something prohibited by law (bar against conveyance, for a specific period) - it had the effect of defeating the provisions of the law. It was held that: \"Taking the agreement as it is, it necessarily would be in the teeth of the obligation in law of the first Respondent to put up the construction. The Printed from counselvise.com 57 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT agreement to sell involved clearly terms which are impliedly prohibited by law in that the first Defendant was thereunder to deliver title to the site and prevented from acting upon the clear obligation under law. This is a clear case at any rate wherein enforcing the agreement unambiguously results in defeating the dictate of the law. The 'sublime' object of the law, the very soul of it stood sacrificed at the altar of the bargain which appears to be a real estate transaction. It would, in other words, in allowing the agreement to fructify, even at the end of ten-year period of non alienation, be a case of an agreement, which completely defeats the law for the reasons already mentioned. 78. Going by the recital in the agreement entered into between the Plaintiff and the first Defendant, possession is handed over by the first Defendant to the Plaintiff. The original Possession Certificate is also said to be handed over to the Plaintiff. The agreement, even according to the Plaintiff, contemplated that within three months of conveyance of the site in favour of the first Defendant, the first Defendant was to convey her rights in the site to the Plaintiff. It is quite clear that the parties contemplated a state of affairs which is completely inconsistent with and in clear collision with the mandate of the law. On its term, it stands out as an affront to the mandate of the law. 79. The illegality goes to the root of the matter. It is quite clear that the Plaintiff must rely upon the illegal transaction and indeed relied upon the same in filing the suit for specific performance. The illegality is not trivial or venial. The illegality cannot be skirted nor got around. The Plaintiff is confronted with it and he must face its consequences. The matter is clear. We do not require to rely upon any parliamentary debate or search for the purpose beyond the plain meaning of the law. The object of the law is set out in unambiguous term. If every allottee chosen after a process of selection under the Rules with reference to certain objective criteria were to enter into bargains of this nature, it will undoubtedly make the law a hanging (sic laughing) stock. (xii) In the present case it is noticed that all the payments by the appellant are in the nature of payments for the purpose which is an offence. In the Motor Vehicles Act, the Chapter XIII in on the title Offence, Penalties and Procedure\". The first section of this chapter le. \"Section 177: General provision for punishment of offences itself provides that \"whoever contravenes any provision of this Act or of any rule, regulation or notification made Printed from counselvise.com 58 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT thereunder shall, if no penalty is provided for the offence be punishable for the first offence with fine which may extend to one hundred rupees, and for any second or subsequent offence with fine which may extend to three hundred rupees.\". Further, section 200 provides for the provisions of composition of offences. As per the above section any contravention of any provision of this Act or of any rule, regulation or notification made thereunder is an offence. And further that even if no 'penalty' has been provided for the offence, such offence shall be punishable with fine. The Motor Vehicles Act provides for punishment in the form of fine even if no penalty has been provided. As per Section 181, whoever drives a motor vehicle in contravention of section 3 or section 4 shall be punishable with imprisonment for a term which may extend to three months, or with fine which may extend to five hundred rupees, or with both Similarly as per section 183, the driving at excessive speed or violation of speed limit is also an offence. As per section 184, whoever drives a motor vehicle at a speed or in a manner which is dangerous to the public, having regard to all the circumstances of the case including the nature, condition and use of the place where the vehicle is driven and the amount of traffic which actually is at the time or which might reasonably be expected to be in the place, shall be punishable. As per section 190(1), Any person who drives or causes or allows to be driven in any public place a motor vehicle or trailer while the vehicle or trailer has any defect, which such person knows of or could have discovered by the exercise of ordinary care and which is calculated to render the driving of the vehicle a source of danger to persons and vehicles using such place, shall be punishable. Further as per section 190(3), any person who drives or causes or allows to be driven, in any public place a motor vehicle which violates the provisions of this Act or the rules made thereunder relating to the carriage of goods which are of dangerous or hazardous nature to human life. shall be punishable. Further as per section 194, whoever drives a motor vehicle or causes or allows a motor vehicle to be driven in contravention of the provisions of section 113 or section 114 or section 115 shall be punishable. Section 113 provides for limits of weight and limitations on use. Thusoverweight in the vehicle is an offence. Further as per sub section (4) of section 113, where the driver or person in charge of a motor vehicle or trailer driven in Printed from counselvise.com 59 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT contravention of sub-section (2) or clause (a) of sub-section (3) is not the owner, a Court may presume that the offerice was committed with the knowledge of or under the orders of the owner of the motor vehicle or trailer. There are other specified violations mentioned in the sections of the Motor Vehicles Act and further as per section 177, violation of any rule, regulation or notification made under the Motor Vehicles Act is offence. (xiii) There cannot be any dispute regarding the disallowability of 'penalty or 'shasti'. Further the vehicle being without adequate safety devices is dangerous for the vehicle, dangerous for the driver and also dangerous for the other common public and other vehicles who might be near the impugned vehicle at any given point of time and can create risk for the life of the many people. Similarly overweight vehicle which is carrying the weight beyond the permissible limits is dangerous for the road infrastructure as the weight being carried is beyond the capacity of the road and also problematic for the general public. Similarly the vehicle which is oversized or which iscarrying the oversized goods is dangerous for the public at large and also dangerous for the public infrastructure. The claim regarding the component of tax in the traffic challan appears to be a general reference to the compounding or composition fee as there is no reference to any specific tax and the purpose thereof in the challan in this regard. The same is to be treated as equivalent to compounding or composition penalty. Further the argument of the assessee regarding claim of deduction of the expenditure on the traffic challan rewards the dishonesty. Those who adhere to the legal provisions of the Motor Vehicles Act and adhere to the size of the vehicle, weight. safety instructions, etc end up incurring higher costs in comparison to those who violate the law and saves on number of trips and saves on other expenditure etc. at the cost of damage to the public property, danger to the lives etc. Further the claim of the appellant if allowed would defeat the purpose of the Motor Vehicles Act In the present case there is no dispute that the impugned payments are for the violation of sections and rules of the Motor Vehicles Act and that the impugned payments are for purpose which are offence under the Motor Vehicles Act. Printed from counselvise.com 60 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT In view of the above detailed discussion the impugned amount paid by the appellant for traffic challans is for violation of law of Motor Vehicles Act and rules and regulations made thereunder and such violations are specifically termed as 'offence in the Act and even though as per the Explanation 1 in section 37(1) even the expenditure for the purpose which is violations of law which are not in nature of offence is also not allowable, and further that the payment of challan does not regularise and does not authorise the continuation of overloading of vehicle and the overload is required to be removed and similarly other defects like over sizing, safety features missing etc. are required to be rectified immediately and further that the appellant has repeatedly and regularly indulged into practice leading to repeated traffic challans and it is thus calculated and well thought out decision and not an innocent unknown mistake and further in totality of the facts and circumstances the deduction is rightly denied by the learned AO and the addition made in the assessment order is hereby upheld. (xiv) It is also highly important to note that an explanation viz. Explanation 3 has been inserted in the Act. This explanation clarifies the Explanation 1. This explanation starts with the phrase, \"For the removal of doubts, it is hereby clarified that\", thus it is clear that this explanation is clarificatory in nature and has been inserted for the removal of doubts. Further the explanation includes the phrase that \"shall be deemed to have always\", thus no new provision is being added and only already existing position has been clarified through the explanation. The clause (ii) of thisexplanation specifically now states that expenditure incurred by an assessee \"to compound an offence under any law for the time being in force\", falls under the phrase\" expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law of the Explanation 1. It is important to note that this explanation is not a new provision but it clarifies for the purpose of removal of doubts the already existing phrase of Explanation 1. In several judgements the composition expenditure was upheld as disallowable even before introduction of this explanation. It is important to note that the same explanation 3 also provides for the disallowance of expenditure with respect to freebies in violation of Medical Council of India Rules which has already been adjudicated by the honourable Supreme Court in Apex Laboratories Pvt. Ltd vs. Deputy Commissioner of Income Tax, Large Tax Payer Unit II [SLP (Civil) No. 23207 of 2019] as liable to be disallowed even before this explanation was Printed from counselvise.com 61 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT on the statute. This shows that the explanation 3 is clarificatory in nature and states the position of law already existing. The Supreme Court has settled a significant controversial issue, regarding allowability of expenditure incurred by the pharma companies in providing freebies /incentives to doctors and other medical practitioners, in favour of Revenue. The said decision thus is understood to clarify the law since its inception, and the controversy as to the proposed amendment by the Finance Act, 2022, by way of insertion of a similar provision from 01.04.2022, vide Explanation 3 to section 37(1) would operate prospectively or retrospectively, also subsides, Further it has already been held in the case of Commissioner of Income- tax v. Mamta Enterprises [2004] 135 Taxman 393 (Karnataka)/[2004] 266 ITR 356 (Karnataka)/[2004] 187 CTR 414 (Karnataka) [30-10-2003] that \"When the section itself declares the expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure, it is not possible to take the view that the expenditure incurred for compounding of the offence should be allowed. When the section is clear and unambiguous, it is not permissible for the Courts to stretch the meaning attached to the provision of law to extend the benefit to a person who violates the law or the Regulations/Rules made by the Corporation or the Municipal Authorities with impunity.\" (emphasis supplied) (xv) The appellant has also contended that estimation of the expenditure has been done by the learned AO in the assessment order. However at the same time the appellant has not placed on record the exact details of the expenditure incurred by the appellant in different sub-categories for different months. The working of disallowance was done during the course of search and seizure proceedings andafter that neither during the post search proceedings nor during the assessment proceedings nor during the present appellate proceedings the appellant has placed on details and documents about the exact specific month -wise details. On the other hand the learned AO has used the date of the appellant itself and arrived at the yearly figures Hon'ble Supreme Court of India in the case of CIT Vs British Paints India Ltd (1991) 188 ITR 44 (SC) has held that it is the duty of the assessing officer to determine the taxable income by making such computation as he considers appropriate in the given situation. Printed from counselvise.com 62 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT It is held by the Hon'ble Supreme Court in the case of Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali [1973] 90 ITR 271 that \"In estimating any escaped turnover, it is inevitable that there is some guesswork The assessing authonty while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not anyone else's The High Court cannot substitute its best judgment for that of the assessing authority.\" It is held by the Hon'ble Supreme Court in the case of Kachwala Gems vs. Joint Commissioner of Income-tax, Jaipur [2007] 158 Taxman 71 (SC)/[2007] 288 ITR 10 (SC)/[2006] 206 CTR 585 (SC)[14-12-2006] that it is well-settled that in a best judgment assessment, there is always a certain degree of guess work and it is the assessee himself who is to blame as he did not submit proper accounts. The Hon'ble Punjab and Haryana High Court in case of Tara Singh V ITO [2017] 81 taxmann.com 293 (Punjab & Haryana) held that the assessing officer in a best judgment assessment can resort to a bona fide estimate based on a rational basis. It is held by the Hon'ble Rajasthan High Court in the case of Chaturbhuj Manoj Kumar v. Commissioner of Income-tax[2017] 82 taxmann.com 103 (Rajasthan)/[2016] 388 ITR 194 (Rajasthan) [29-07 2016] that by invoking provisions of section 145(3) or in a case of a best judgment assessment under section 144, some guess work will always have to be resorted to by the authorities. The Hon'ble Andhra Pradesh High Court in the case of Rajnik& Co. v. Assistant Commissioner of Income-tax[2001] 117 Taxman 675 (Andhra Pradesh) also observed regarding that where it becomes necessary to have recourse to some form of estimate by the Income-tax Department, that method should be adopted whichapproximates most near to the truth. It is held by the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax [1954] 26 ITR 775 (SC)[29-10- 1954] that that in arriving at its estimate opportunity should be provided to the assessee to place any relevant material on the point that it has, and Printed from counselvise.com 63 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT opportunity to meet the substance of any private inquiries made by the Income-tax Officer if it is intended to make the estimate on the foot of those enquiries. In view of the submissions of the appellant, the appellant is provided opportunity to place on record the exact month wise details along with supporting documents copies from with the search and seizure action (no additional evidence is allowed) before the learned AO within one month of passing of this order showing working of the exact amounts on the issues, which shall be considered by the Id. AO after due verification. In view of this discussion this ground of appeal is hereby dismissed in above terms. Ground No. 3 to 3.3 6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- The brief facts noted in assessment order are that during the course of search proceedings at Cement Factory road, Sahu Nagar. Sawai Madhopur, it was noticed that a lot of bogus expenditure & missing vouchers related to expenses debited in the books of respective company were found. On being confronted, Sh. Manish Kumar Mor, the accountant vide Q. No.34 to 39 categorically stated that bogus bills under the head repairs & maintenance were made in the name of some business concerns such as (1) ChhotuMistri (2) New NSE (3) Star Seat Repairing Works (4) Shahnawaj Body Repairing (5) Shahnwaj Body Repairing etc at his business place. Further. during revocation of prohibitory arder on 26.02.2019, again various incriminating documents were found & seized from the business premises of M/s Professional Automotives Pvt. Ltd. situated at Sahu Nagar, Cement Factory, Sawai Madhopur, which were annexed as per annexure AS, Ex-1 to 118. All the incriminating documents were related to bills & vouchers related to revenue nature. Most of the vouchers were found to be self-made & appeared to be bogus/dummy. These bills/vouchers were found to be of business concerns exactly the same, as stated by the accountant of the assessee Firm during the course of initial search proeceedings such as (1) ChhotuMistri (2) New NSE (3) Star Seat Repairing Works (4) Shahnawaj Body Repairing (5) Shahnwaj Body Repairing etc. Printed from counselvise.com 64 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Further, as noted in the assessment order, during the search proceedings all the bill book were seized and bill-book, as seized during the course of initial search proceedings dated 18.01.2019 were found topartly blank. On the other handpartly bills were in the form of estimation of bill in the name of M/s Professional Automotives Pvt. Ltd. (PAPL) wherein date was not mentioned, which suggested that the appellant company were producing bogus bills just before initiation of search on dated 16.01.2019 and these incomplete bogus bills were found in the starting of search. Accordingly, on the basis of bill produced/not produced with respect to expenses debited under the head \"Repair and Maintenance\" as well as bill books found, a summarized chart was prepared in different years to find out the disallowable expenses on account of missing vouchers/bogus vouchers under the head \"Repairs & maintenance\". Printed from counselvise.com 65 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Printed from counselvise.com 66 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Printed from counselvise.com 67 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT On the basis of documents found from the premise of assesssee company (PAPL), a summarized chart were prepared in different years to find out the disallowable expenses on account of missing vouchers/bogus vouchers under the head \"Repairs & maintenance\" and \"Toll & Trip Expenses\". For this, a data was prepared for a particular month in different Printed from counselvise.com 68 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT years to verify the genuineness of expenses debited under the head \"Repairs & Maintenance\" and \"Toll & Trip Expenses\" in the books of M/s PAPL On the basis of such data, which was prepared on monthly basis, an estimation of amount of disallowable expenses was worked out in particular year under the head \"Repairs & maintenance\" and \"Toll & Trip Expenses\" in the case of M/s PAPL. The same is also making a part of while recording statement of Shri Om PrakashAgarwal (Gupta) vide Q. No. 10 to 11 dated 28.02.2019. On being confronted, the director of the company vide Q. No.6,7,88 9 of statement recorded on 28.02.2019 stated that some of mechanic were illetrate belonging to unorganized sector, neither capable of nor were required to maintain any books of accounts and not in a position to provide any bill for work done by them, so the same vouchers in the name of such mechanic/such entities were kept in his possession for making bill against the work done by him. The same bills were made by themselves & thereafter the same bills-book were returned back to such persons. It was further admitted by him that some of the bills were lost by the drivers during the transit period & some of was made as \"kaccha bill\". Therefore, to meet-out/adjustment of such type of expenses, they made these types of provisions. Thus it was admitted that artificial bills were being in future by the appellant Therefore, as per mutual understanding whenever a repair job was carried out by the mistris, they were getting it noted in a diary and as per convenience as well as their requirement of payment, they were coming to the assessee with such details and the bill books which were kept at assessee's premises, the necessary invoices were made for expenses actually incurred by assessee and subsequently bill books were returned to them. From reply of the appellant it is apparent that the genuineness of the bill is not proved as well as expenses were not verified with supporting bills and vouchers. Therefore, the contention of the appellant is not acceptable as the argument put forth by the appellant does not hold any strength and is just an argument for the sake of argument. The arrangement adopted by the appellant in debiting expenses can't be said to be valid one and in accordance with provisions of Income Tax Act as well as accounting standard. Printed from counselvise.com 69 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Further, on perusal of copy of bills as reproduced by the Id. AO in assessment order, it is seen that these bill do not contain the registration no. of business concern. Therefore, the identity and genuineness of these business concerns are not verifiable and any expense claimed on the basis of these bogus bills are also not allowable. Thus it is clear, the provision was adopted by the appellant company to book bogus expense. Thus in view of above, the Id. AO rightly held that appellant company had involved in making bogus expenses to suppress the actual profit in the case of M/s Professional Automotives Pvt. Ltd. (PAPL). The appellant has also contended that it had furnished the affidavit of some persons which were not considered by the Id. AO. It is worthwhile to mention here that in such scenario, the copy of affidavits produced by the appellant also does not hold any strength as there is nothing which could prove relation between the bills of business concern and persons giving affidavit ie. the said business concern is registered under his name with a valid registration No. Apart from this, bill books of some business concern were also found which were used by the appellant to debit the bogus expenses. Further, as regards the appellant contention that such practice of keeping bill books of third parties was followed only in few months of FY 2018-19 and ESTIMATION was made by adopting percentage of bills found vis a vis bills not found/bills alleged as bogus and estimating disallowance of total of Rs.7.32.32,126/- for all the seven years. On perusal of assessment order, it is noticed that estimation was done on the basis the appellant had failed to venfy the expenses debited under the repair and maintenance head with supporting bills and vouchers on test check basis for a particular month in all the seven years. Thus the circumstantial evidences suggested that appellant followed similar practice in remaining months also. However at the same time the appellant has not placed on record the exact details of the expenditure incurred by the appellant in different sub- categories for different months. The working of disallowance was done during the course of search and seizure proceedings and after that neither during the post search proceedings nor during the assessment proceedings nor during the present appellate proceedings the appellant has placed on about the exact specific month -wise details and documents. Printed from counselvise.com 70 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT On the other hand the learned AO has used the date of the appellant itself and arrived at the yearly figures. Hon'ble Supreme Court of India in the case of CIT Vs British Paints India Ltd (1991) 188 ITR 44 (SC) has held that it is the duty of the assessing officer to determine the taxable income by making such computation as he considers appropriate in the given situation. It is held by the Hon'ble Supreme Court in the case of Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali [1973] 90 ITR 271 that \"In estimating any escaped turnover, it is inevitable that there is some guesswork. The assessing authority while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not anyone else's. The High Court cannot substitute its best judgment for that of the assessing authority.\" It is held by the Hon'ble Supreme Court in the case of Kachwala Gems vs. Joint Commissioner of Income-tax, Jaipur (2007) 158 Taxman 71 (SC)/[2007] 288 ITR 10 (SC)/[2006] 206 CTR 585 (SC) [14-12-2006] that it is well-settled that in a best judgment assessment, there is always a certain degree of guess work and it is the assessee himself who is to blame as he did not submit proper accounts. The Hon'ble Punjab and Haryana High Court in case of Tara Singh V ITO [2017] 81 taxmann.com 293 (Punjab & Haryana) held that the assessing officer in a best judgment assessment can resort to a bona fide estimate based on a rational basis. It is held by the Hon'ble Rajasthan High Court in the case of Chaturbhuj Manoj Kumar v. Commissioner of Income-tax [2017] 82 taxmann.com 103 (Rajasthan)/[2016] 388 ITR 194 (Rajasthan) [29-07 2016] that by invoking provisions of section 145(3) or in a case of a best judgment assessment under section 144, some guess work will always have to be resorted to by the authorities. The Hon'ble Andhra Pradesh High Court in the case of Rajnik& Co. v. Assistant Commissioner of Income-tax[2001] 117 Taxman 675 (Andhra Printed from counselvise.com 71 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Pradesh) also observed regarding that where it becomes necessary to have recourse to some form of estimate by the Income-tax Department, that method should be adopted which approximates most near to the truth. It is held by the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax [1954] 26 ITR 775 (SC)[29-10- 1954] that that in arriving at its estimate opportunity should be provided to the assessee to place any relevant material on the point that it has, and opportunity to meet the substance of any private inquiries made by the Income-tax Officer if it is intended to make the estimate on the foot of those enquiries. In view of the submissions of the appellant, the appellant is provided opportunity to place on record the exact month wise details along with supporting documentscopies from with the search and seizure action (no additional evidence is allowed) before the learned AO within one month of passing of this order showing working of the exact amounts on the issues, which shall be considered by the Id. AO in giving effect to this order after verification. The appellant has referred to the affidavits given by the labour persons. However on the one hand the appellant has claimed that such labourers are not even able to make bill for the service rendered by them and they are illiterate and on the other hand the appellant has claimed that they have given the affidavits. It is clearly indisputable that the affidavits have been got manufactured by the appellant from them. Also the identity matching is not proved that they are the same person in whose purpose bill book were printed as claimed by appellant. Without prejudice, also the influence of the appellant on such persons is well established as the appellant was even having the bill books prepared in their business name and was controlling the billings done in their name. Thus such affidavits are merecolourable devices and afterthought of the appellant. When the search and seizure action was taking place neither the appellant showed before the search party the actual work if any carried out by them and also nor produced these persons before the search party for their examination by the search party During the course of search and seizure action it was worked out after detailed analysis of the bills and documents of the appellant that a large percentage of the expenditure on this head was bogus. However the director and the employees of the appellant company merely made theoretical baseless self-serving statement that the expenditure was actual and none of them produced the evidences before Printed from counselvise.com 72 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT the search party regarding the genuineness of the expenditure and genuineness of the work done and to prove that the work was being done by these labourers only. The onus cannot be shifted on the assessing authority in this regard. Merely making baseless statements during the course of search and seizure action in their own support does not help when the search party was having incriminating documentary evidences and incriminating evidences showing the claim of bogus expenditure by the appellant. It is the first and normal reaction of a tax evader to claim himself to be right and to claim that all the expenditure is genuine whereas the deduction of expenses is not allowable in the law merely by making the statements and the deduction of the expense is allowable in the law only when the expenditure is proved to have been actually been incurred wholly and exclusively in genuine and lawful manner. It is important to note that in the statements of the director of the company it was stated that multiple places that genuineness of the expenditure will be proved later on and documents will be produced. However neither during the course of post searchproceedings nor during the assessment proceedings nor during the present appeal proceedings the appellant has produced any evidences to prove the genuineness of the expenditure. The appellant has merely made the arguments and legal submissions. However the appellant has not placed on record the evidences regarding (i) nature and extent of work done by such labour, (ii) the vehicle details. withdate and details of work on which such repair and maintenance was carried out, (iii) such claim of expenditure is not a duplicate claim ie. claim of repair and maintenance en-route as well as in the parking area of the appellant. Regarding toll and trip expenses the appellant has claimed that all expenses incurred on the trip are considered in the toll and trip expenses. When during the course of search and seizure action it was found that either the bills were manufactured by the appellant itself or there were no bills and vouchers in the earlier periods, the onus is completely on the appellant to prove with sterling evidences that the expenditure was actually incurred. Regarding the argument of the appellant regarding the need ofthe repair and maintenance expenses, it is noted that the learned AO has not disallowed the entire amount of repair and expenses but only a small part of the expenses has been disallowed which was found to be not genuine and not incurred at the time of search and seizure action. Further the Printed from counselvise.com 73 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT appellant has also claimed that repair and maintenance expenses were incurred during the trip and for such expenses which are incurred during the trip the bills were not available. However it is not the case of the appellant that no deduction at all of the repair and maintenance expenses incurred during the course of trips has been not allowed by the learned AO. No such verifiable bifurcations has been placed on the record to show how much of the disallowed expenditure pertained to expenditure claimed to have been incurred during the course of trip and also no verifiable information has been placed on record to show that how much deduction of the repair and maintenance expenses incurred or claim to have been incurred during the course of trips has been allowed in the assessment order. Further this claim of the appellant is also found to be contradictory as it was claimed that the labourer for which the bill books were found and relevant expenditure was found to be bogus, was doing the repairs locally whereas the appellant has argued regarding the claim of deduction of expenses incurred during the course of trips. The appellant claimed during the assessment proceedings that Sh. Manish Kumar Mor has stated the accounting procedure adopted for accounting of Repairs expenses in the books of accounts on the basis of bills, vouchers submitted by drivers after completion of the trip, who at times do not provide bills or do not provide proper bills, which creates difficulty in accounting of the relevant expenditure as well as to getting approval of such expenditure from the concerned management. Accordingly, for the expenses which was incurred at the country side by the driver during the journey for which no bill was given by the service provider or some kachha bill is given, a voucher is prepared by the accounts department through the bill books of the labourer/Mistri and verified by any of the director/ authorized person. Thus prima facie the appellant has claimed the deduction of these expenses in toll and trip expenses as well as in the repair and maintenance expenses. As such practice of bogus and artificial billing is prohibited and debarred by the law and is in violation of law, the claim of expenditure is also liable to be denied and disallowed due to the Explanation 1 in Section 37(1) of the Act. The appellant has also referred to the data to claim that there is no abnormal increase in the repair and maintenance expenses in the years covered by the search action as a percentage of the turnover. However this contention of the appellant is very general and not relevant to the Printed from counselvise.com 74 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT present case. It is important to note that the present case is of search and seizure action. It is not the case where the during the course of normal scrutiny proceedings the assessee would have been unable to produce some of the bills and vouchers, Evenduring the course of audit only the sample verification is carried out. It is also the established rule that the auditor is not the bloodhound. Thus even the audit report is of no conclusive evidence in view of the clear findings of the search and seizure action. In the present case search and seizure action was carried out and it was found that the assessee appellant was manufacturing the bogus bills and this practice was started in the year in which the search took place and at the same time in the immediately preceding year it was found that for the almost similar percentage of amount there were no bills and vouchers for the expenditure. Thus in the earlier year the appellant was debiting the expenditure without actually incurring the expenditure and there was no bills and vouchers and in the year of search the appellant modified the modus operandi and started using the bogus self made bills to cover the deduction of spend which are in the books of accounts which was actually not incurred. What other modus operandi would have been used in the earlier years which have not been investigated is not unearthed. As noted by the Id. AO, on the commencement of the lifting of Prohibitory Order, the department continued asked the assessee to explain the genuineness of the bills related to various expenses. The same was started at the beginning of the search proceedings (no new explanation was asked at the time of lifting of Prohibitory Order). But the assessee failed to explain. Therefore, it is concluded that the assessee has not proved the genuineness of such expenses even after getting a significant period of more than one month (from 16.01.2019 to 26.02.2019). It is a settled law that unaccounted transactions take place in secrecy and directevidence about secret transaction would be rarely available and the inference had to be drawn on the basis of circumstances available on the record and that the genuineness of claim had to be considered in view of the surrounding circumstances and applying the test of human probabilities. [SumatiDayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC)] A party who relies on a recitalhas to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed ar taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made Printed from counselvise.com 75 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. [Refer judgement of Hon'ble Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR 540] It is held by the Hon'ble Supreme Court in the case of AnantharamVeerasinghaiah& Co. v. Commissioner of Income-tax [1980] 123 ITR 457 (SC)/[1980] 16 CTR 189 (SC)[15-04-1980] as under- \"Neither law nor human experience guarantees that an assessee who has been dishonest in one assessment year is bound to be honest in a subsequent assessment year.\" It is held by the Hon'ble ITAT in Sushil Kumar Mohnani vs. Income-tax Officer, Ward, Katni (M.P.) [2011] 9 taxmann.com 314 (Jabalpur) abalpur) (TM) [01-06-2010] as under:- “…….It is observed that the Hon'ble Apex Court in the case of SumatiDayal (supra) has held as under “………in all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within an exemption provided by the Act lies upon the assessee. But, in view of section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut it, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature.\" It is clear from the decision of the Hon'ble Supreme Court in the case of SumatiDayal (supra) that direct evidence about secret transaction would be rarely available and the inference had to be drawn on the basis of circumstances available on the record and that the genuineness of claim had to be considered in view of the surrounding circumstances and applying the test of human probabilities.\" It is held by the Hon'ble ITAT in Income-tax Officer vs. Solid Machinery Co. (P.) Ltd. [2022] 143 taxmann.com 293 (Mumbai - Trib.)[19-10-2022] as under- Printed from counselvise.com 76 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT 1. It is also important that when we examine the genuineness of the transactions entered into by the assessee, we must also bear in mind Hon'ble Supreme Court's observation, in the case of CIT v. Durga Prasad More [1971] 82 ITR 540, to the effect that \"Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities\". Similarly, in a later decision in the case of SumatiDayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC), Hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent and not real, and observed that, \"This, in our opinion is a superficial approach to the problem. The matter has to be considered in the light of human probabilities.... Similarly the observation that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably\". We will be superficial in our approach in case we examine the claim of the assessee solely on the basis of documents filed by the assessee and overlook clear the unusual pattern in the documents filed by the assessee and pretend to be oblivious of the ground realities. As Hon'ble Supreme Court has observed, in the case of Durga Prasad More (supra ).......... \"it is true that an apparent must be considered real until it isshown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents\". As a final fact finding authority, this Tribunal cannot be superficial in its assessment of the genuineness of a transaction, and this call is to be taken not only in the light of the face value of the documents sighted before the Tribunal but also in the light of all the surrounding circumstances, the preponderance of human probabilities and ground realities. There may be a difference in subjective perception on such Printed from counselvise.com 77 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT issues, on the same set of facts, but that cannot be a reason enough for the fact- finding authorities to avoid taking subjective calls on these aspects, and remain confined to the findings on the basis of irrefutable evidence. Hon'ble Supreme Court has, in the case of Durga Prasad More (supra), observed that \"human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law. This faith in the Tribunal by Hon'ble Courts above makes the job of the Tribunal even more onerous and demanding and, in our considered view, it does require the Tribunal to take a holistic view of the matter, in the light of surrounding circumstances, the preponderance of probabilities and ground realities, rather than being swayed by the not so convincing, but apparently in order, documents and examining them, in a pedantic manner, with the blinkers on. In the case of Commissioner of Income-tax v. Md. WarasatHussain [1987] 35 Taxman 227 (Patna)/[1988] 171 ITR 405 (Patna)/[1988] 67 CTR 75 (Patna) [10-09-1987] it was held by Hon'ble Patna High Court as under- \"This was a matter with the special knowledge of the assessee. The Tribunal could not be expected to produce the sale deed. The learned counsel for the assessee submitted that even if the assessee did not produce the original sale deed, the revenue could have obtained certified copy of the sale deed from the registration office and disprovedthe stand of the assessee that the land had been sold really for a sum higher than Rs. 49,500. This does not lie in the mouth of the assessee. No Court or the Tribunal should countenance an assessee the attitude of failure to produce relevant material and ask the adversary to disprove it. This attitude was decried by Chinnappa Reddy, J. in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 (SC). It is held by the Hon'ble ITAT in the case of KhopadeKisanraoManikrao v. Assistant Commissioner of Income-tax [2000] 74 ITD 25 (Pune) (TM)/[2000] 69 TTJ 135 (Pune) (TM) [27-01-2000] as under- 134. Having held that the seized record is not the complete record of unaccounted transactions, the question which arises is whether these facts justify the estimation of undisclosed income. It is well settled law that what is apparent is the real state of affairs and the onus to prove that apparent was not real is on the party who claims it to be so. Reference can be made to the Supreme Court decision in the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349. In the present case, the dispute is about the sale consideration of the plots sold by the assessee in the block period. What is apparent state of affair is the consideration of sale shown in the sale agreements/deeds and recorded by the assessee in his regular books of account. Therefore, the burden lies on the department to prove Printed from counselvise.com 78 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT that it is false or unaccounted in the present case, there are enough materials in the form of seized record to prove that sale consideration shown by the assessee in his regular books of account and the sale agreements/deeds were false and incorrect. The assessee himself has also admitted this fact by offering the amount of undisclosed income in his return under section 158BC. Therefore, in my opinion, the onus which lies on the Revenue has been discharged. Since the sale consideration recorded in the sale deeds/agreements and in the regular books of account have been proved to be false, in my opinion, the Assessing Officer justified in making the estimate under section 143(3)/145 in accordance with the guidelines given by the Apex Court in the case of Dhakeswari Cotton Mills Ltd. (supra) and in the case of RaghubarMandalHariharMandal (supra) as discussed by us in earlier part of the order. This view is also fortified by the decision of the Supreme Court in the case of H.M. Esufali H.M. Abdulali (supra). It has been contended on behalf of the assessee that case law relied upon by the Id. senior D.R. where the estimate was justified related to cases where articles sold were standard articles while in the present case, it isthe land which has been sold which is not of the standard quality in respect of each plot and those cases, therefore, are distinguishable. In my opinion, such aspect of the argument cannot be accepted. Once a fact has been proved to be in existence, the presumption to the existence of such fact can be raised backward and forward as held by the President as 3rd Member in the case of Overseas Chinese Cuisine (supra). It has been held thereon that if a particular habit or bad habit of manipulating the sale bills was found to be existing, then the same state of things could be presumed in respect of other transactions. Even according to the test of human probabilities, as approved by the Hon'ble Supreme Court in the case of SumatiDayal (supra), no man of prudence would sell similar items at similar place having great disparity. No doubt, there may be certain variations on account of mitigating circumstances, which have to be proved by the assessee. Perusal of the record shows that there is a great disparity in the prices of plots in respect of transactions where seized material is available and for transactions where no record is available even though such transactions are made within the short period/interval. This can be proved by some examples In Survey No. 46, the assessee had sold 5 plots in assessment year 1989- 90 at the rate of Rs. 5 per sq.ft. as per sale agreement/deed. While as per the seized record, it has been found that assessee had charged excess amounts in respect of 4 plots It has also been found that excess money is considerably very high as compared to the price shown in the documents. For instance, the excess money for plot Nos. 7, 8 and 51 were Rs. 12,555 Rs. 15,348 and Rs. 18,533 respectively as against agreed price of Rs. 8,910, Rs. 9,405 and Rs. 8,745 respectively. Similarly, in Survey No. 18 assessee had sold half of the plot No. 71 Printed from counselvise.com 79 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT to ShriPrakash Nigam and other half of the plot to Shri Ramesh Patil on the same date of 17th February, 1992 at apparent consideration of Rs. 1,125 each. However, as per seized record it is found that he had charged excess money of Rs. 6,375 (more than 5 times) from ShriPrakash Nigam. It is impossible to believe that assessee would not have charged excess money for other half of the plot No. 71 which was similarly situated and sold on the same date. According to the test of human probabilities, the assessee must have charged excess money in respect of the other plots. If there was any mitigating circumstances, it was for the assessee to prove. But, as far as the question of estimation is concerned, there is enough material onthe record to justify the same.\" (emphasis supplied) As per the ratio of the judgement of in the case of Sumilon Industries Ltd. v. Income Tax Settlement Commission [2017] 83 taxmann.com 352 (Gujarat) as under:- \"18. In case of H. M. Esufali H M. Abdulali (supra) the Supreme Court permitted the department to project the figures of unaccounted production actually available for a short period of an assessment year for the entire year on the ground that in any case of best judgement assessment there is bound to be some guess work. As long as the same is done bona fide and on the basis of some material on record and not arbitrary. the same would be permissible in law.\" As per the ratio of the judgement of the Hon'ble Bombay High Court in the case of Harish Textile Engrs. Ltd. v. Deputy Commissioner of Income Tax, Special Range-1 [2015] 63 taxmann.com 66 (Bombay)/[2016] 236 Taxman 420 (Bombay)/[2015] 379 ITR 160 (Bombay) (30-10-2015), where loose papers found during search indicated on money receipt by assessee on sale of stenter machines for part of block period and assessee admitted to have received on money during remaining block period also, certain amount was added to assessee's income on basis of guess work as being on money received for remaining block period. The relevant para of the judgement is as under- 5. (e) We have considered the rival submissions. The appellant sought to rely upon the definition of undisclosed income which has been defined in Section 1588(b) of the Act. Undisclosed income is defined as any income based on any entry in the books of account or other documents or transactions which have not been disclosed or would not have been disclosed for the purposes of the Act. It is submitted that in this case, there is no evidence in the form of any entry in the books of account or any other document to establish receipt of 'on money' by the appellant. Consequently, the amount of Rs.10 lakhs being added to the Printed from counselvise.com 80 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT appellant's income as being 'on money received for the period 1986-1989 is unsustainable in law. It is not in dispute that there is documentary evidence of receipt of 'on money' by the appellant for the period 1989-96. Thus there was evidence of receipt of 'on money only for the part of the block period on sale of Stenter machines for the period 1989-96. This evidence was extrapolated in the impugned order to conclude that 'on money' had been received on the sale of Stenter machines also for the period 1986-89. This extrapolation in case of dealing outside the regular books of accounts was a subject of consideration by the Supreme Court in CSTv. H.M. Esufali AIR 1973 (SC) 2266 and it was not disturbed. This inter alia on the ground that the task of detecting escaped turnover is not easy and would involve some element of guess work. The above decision of Apex Court is sought to be distinguished on the ground that itwas a case of best judgment assessment and therefore would have no application to the case of undisclosed income. We do not accept the above submission. As in case of best judgment assessment an assessment under Chapter XIV B of the Act also involves an element of guess work (see CIT v. Dr. M.K.E Memon 248 ITR 310). However the guess work should not be arbitrary....... (emphasis supplied) As per the ratio of the judgement in the case of Commissioner of Income-tax-VII v. Chetan Das Lachman Das [2012] 25 taxmann.com 227 (Delhi)/[2012] 211 Taxman 61 (Delhi)/[2012] 254 CTR 392 (Delhi) [07-08-2012], transaction can be presumed for whole period on basis of seized material - Seized material can also be relied upon to draw inference that there can be similar transactions throughout period of six years covered by section 153A. The relevant para of the judgement is as under.- 11. We have considered the facts and the rival submissions. We are concerned with the search assessments made under Section 153A of the Act. Unlike Chapter XIV-B which provided for a special procedure for assessment of search cases, Section 153A which provides for an assessment in case of search, and was introduced by the Finance Act, 2003 w.e.f. 01.06.2003, does not provide that a search assessment has to be made on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the Assessing Officer and relatable to the evidence found. The earlier Section 158BB which is not applicable in case of a search conducted after 31.05.2003, provided that the computation of the undisclosed income can only be on the basis of the evidence found as a result of search or other documents and materials or information as are available with the Assessing Officer, provided they are relatable to the evidence found. Section 153A(1)(b) provides for the Printed from counselvise.com 81 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. The question, however, is whether the seized material can be relied upon to also draw the inference that there can be similar transactions throughout the period of six years covered by Section 153A. It is in this context it is relevant to note the judgment of the Supreme Court in H.M. Esufali H.M. Abdulali (supra). We have to remember that with the advent of Section 153A we are taken back to the pre-chapter XIV-B situation, where assessments were made on the basis of material and evidence collected during search. In the cited judgment the facts were these. The case arose under the sales tax law. Assessments under the MP General Sale Tax Actand Central Sales Tax Act had been completed on a dealer of iron and steel. They were made primarily on the basis of the returned filed by the assessee and the books of accounts. Subsequently, the flying squad of the sales tax department inspected the business premises of the assessee and found a bill book for the period of 19 days from September 1 to 19, 1960 showing sales of the value of Rs. 31,171/- which had not been entered in the account books maintained by the dealer. On this basis the Sales Tax Officer initiated reassessment and after rejecting the account books estimated the escaped turn over at Rs. 2,50,000/- under the MP General Sales Tax Act and Rs. 1,00,000/- under the Central Sales Tax Act, adopting the sale of Rs. 31,171/- as escaped turnover for a period of 19 days as the basis. The contention of the assessee in that case was that the action of the Sales Tax Officer was arbitrary inasmuch as he had no evidence of escaped turnover for the entire accounting period and he was not legally correct in estimating or inferring that the assessee would have indulged in sales outside the books of accounts for the entire accounting period. The Supreme Court rejected such a contention in the following words: - \"It is now proved as well as admitted that his dealings outside his accounts during a period of 19 days were of the value of Rs. 31,171.28. From this circumstance, it was open to the Sales Tax Officer to infer that the assessee had large-scale dealings outside his accounts. The assessee has neither pleaded nor established any justifiable reason for not entering in his accounts the dealings noted in the bill book seized. It is obvious that he was maintaining false accounts to evade payment of sales tax. In such a situation, it was not possible for the Sales Tax Printed from counselvise.com 82 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Officer to find out precisely the turnover suppressed. He could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him is not arbitrary and has nexus with facts discovered, the same cannot be questioned. In the very nature of things the estimate made may be an over-estimate or an under-estimate or an under- estimate. But, that is no ground for interfering with his \"best judgment\". It is true that the basis adopted by the officer should be relevant to the estimate made. The High Court was wrong in assuming that the assessing authority must have material before it to prove the exact turnover suppressed. If that is true, there is no question of \"best judgment assessment. The assessee cannot be permitted to take advantage of his own illegal acts. It was his duty to place all facts truthfully before the assessing authority. If he fails to do his duty, he cannot be allowed to call upon the assessing authority to prove conclusively what turnover he had suppressed. That fact must be within his personal knowledge. Hence, the burden of proving that fact is on him. No circumstance has been placed before the assessing authority to show that the assessee's dealings during September 1, 1960, to September 19, 1960, outside his accounts were due to some exceptional circumstance or that they were proportionately more than his dealings outside his accounts during the remaining periods. The assessing authority could not have been in possession of any correct measure to find outthe escaped turnover during the periods November 1, 1959, to August 31, 1960, and September 20, 1960, to October 20, 1960. The task of the assessing authority in finding out the escaped turnover was by no means easy. In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the \"best judgment\" assessment, no doubt, should arrive at its conclusion without any bias and on rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his \"best judgment\" and not of anyone else. The High Court could not substitute its \"best judgment\" for that of the assessing authority. In the case of \"best judgment\" assessments, the courts will have to first see whether the accounts maintained by the assessee were rightly rejected as unreliable. If they come to the conclusion that they were rightly rejected, the next question that arises for consideration is whether the basis adopted in estimating the turnover has reasonable nexus with the estimate made. If the basis adopted is held to be a relevant basis even though the courts may think that it is not the most appropriate basis, the estimate made by the assessing authority cannot be disturbed. In the present case, there is no dispute that the assessee's accounts were rightly discarded. We do not agree with the High Court that it is the duty of Printed from counselvise.com 83 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT the assessing authority to adduce proof in support of its estimate. The basis adopted by the Sales Tax Officer was a relevant one whether it was the most appropriate or not Hence the High Court was not justified in interfering with the same.\" 12. In the present case the CIT (Appeals) found that the assessee did record two rates as found from the seized papers, but entered only the lower rate in the sale bills. He rightly stated that even though the seized papers related to the period of 18 days in November, 2005 \"it reiterates the fact of assessee's conduct in suppressing the profit rate disclosed in the books\". The CIT (Appeals) has further found that \"the fact of such practice was also admitted by the partners during the search\". On the basis of these findings the CIT (Appeals) rightly agreed with the Assessing Officer that the book results deserved to be rejected under Section 145 and an estimate of the true income earned by the assessee had to be made. Where, however, he appears to have misdirected himself is that after recording the above findings, he should have upheld the turnover of Hing and compound Hing as estimated by the Assessing Officer instead of directing him to accept the turnover of Hing and compound Hing as shown by the assessee, with a slight enhancement of the gross profit by 2% in the case of Hing and by directing the Assessing Officer to adopt the same rate of gross profit in the case of compound Hing as was adopted in the case of Hing. The CIT (Appeals) does not appear to be justified in interfering with the estimate made by the Assessing Officer, having regard to the observations made in the judgment of the Supreme Court cited (supra). The limited question which the CIT (Appeals) couldhave examined was whether the tumover estimated by the Assessing Officer was arbitrary or based on some material. 13. Coming to the order of the Tribunal, we are of the view that the reasons given by it to distinguish the judgment of the Supreme Court cited (supra) are not sound Firstly, there was seized material in the present case to show that the assessee has been indulging in off-record transactions. The observation of the Tribunal that no evidence was found to show that the actual turnover of the assessee was more than the declared turnover is hair splitting. The Tribunal lost sight of the fact that all was not well with the books of account maintained by the assessee and it has been keeping away its income from the books. That should have been sufficient for the Tribunal to examine the estimate made by the Assessing Officer, having regard to the principles laid down in the judgment of the Supreme Court (supra). The Tribunal also failed to note the difference between Section 158BB appearing in the Chapter-XIVB and the assessment made by virtue of the provisions of Section 153A of the Act. Secondly, the Tribunal expects the purchasers from the assessee to come forward and declare that they have paid Printed from counselvise.com 84 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT more than what was appearing in the sale bills issued to them and has commented upon the lack of any inquiry from the purchasers on this line. Suffice to say that this throws an impossible burden on the Assessing Officer, having regard to the observations of the Supreme Court that the assessee cannot be permitted to take advantage of his own illegal acts, that it was his duty to place all facts truthfully before the assessing authority, that if he fails to do his duty he cannot be allowed to say that assessing authority failed to establish suppression of income, that the facts are within his personal knowledge and therefore it was the burden of the assessee to prove that there was no suppression. Thirdly, the Tribunal has stated that there was no corroborative material to substantiate the contents of the loose papers found during the search. We are not impressed by this reason at all The papers are not denied or disputed by the assessee. The CIT (Appeals) has found that the partners of the assessee firm had admitted to the practice of suppressing the profits. The papers themselves show two different rates, one higher and the other lower and on comparison with the sale bills it has been found that the sale bills show the lower rate and these findings have not been denied by the assessea. The Tribunal, therefore, erred in looking for some other corroboration to substantiate the contents of the loose papers, overlooking that the loose papers needed no further corroboration and the sale bills compared with the seized papers themselves corroborated the suppression of income. Fourthly, the Tribunal has relied on the observations of the CIT (Appeals) that no serious consideration can be given to the loose papers and has held that this shows that there is \"nothing more in Revenue's kitty apart from those said loose papers pertaining to November, 2005 (financial year 2005-06) to support suppression of sales receipts on the part of the assessee firm\" The Tribunal, with respect, has misread the observations of the CIT (Appeals) and has relied on a single observation without reading the order of the CIT (Appeals) as a whole. Moreover, in such cases, it is expected of the Tribunal to also independentlyexamine the decision of the CIT (Appeals) which is impugned before it. In such cases it would be more appropriate to find out or ascertain whether there is any positive material which is in support of the assessee's case or anything upon which the assessee can rely in order to discharge the burden placed upon him in the light of the judgment of the Supreme Court in H.M. Esufali H.M. Abdulali (supra). Mere negative findings should not be made use of to throw out the case of the department. Lastly, the reliance placed by the Tribunal on the judgment of this Court in CIT v. Anand Kumar Deepak Kumar (2007) 294 ITR 497/160 Taxman 206 does not seem appropriate. There it was held that there was no presumption that unaccounted sales in the pre-search period would continue in the post search period also. This judgment has no application to the present case because the search took place on 13.12.2005 which falls in the year Printed from counselvise.com 85 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT relevant to the assessment year 2006-07 The assessments under Section 153A of the Act have been completed up to and including the assessment year 2006- 07. Even if there can be no presumption that after 13.12.2005 there could have been unaccounted sales of Hing or compound Hing, it is hardly material since only a period of 3% months were left after the date of search till the end of the previous year ie. 31.03.2006. (emphasis supplied) It is held in the case of GopalLalBhadruka v. Deputy Commissioner of Income-tax [2012] 27 taxmann.com 167 (Andhra Pradesh)/[2012] 346 ITR 106 (Andhra Pradesh)/[2012] 253 CTR 80 (Andhra Pradesh) (15-12-2011] that principles of judgement of CST v. H. M. Esufali, H. M. Abdulali [1973] 90 ITR 271 (SC) would equally apply to the case of receipt of on money by the assessee in that case. The relevant para are as under- \"20. It was contended by learned counsel for the assessees that there was no evidence before the Assessing Officer to concludethat on-money was received by Ahura Holdings in respect of all the sale transactions. It was submitted that there may have been material with regard to eight such transactions but that does not mean that the same script was played out for all the transactions. We cannot agree. There was adequate material before the Assessing Officer in the form of eight sale deeds and in the form of replies given by Gopal to questions posed to him with regard to receipt of on-money to enable the Assessing Officer to come to an informed conclusion in this regard. Appreciation of the available material is within the domain of the Assessing Officer and this does not lead to any substantial question of law, unless the conclusions arrived at are perverse. That is not the position in this case. 21. In CST v. H. M. Esufali, H. M. Abdulali [1973] 90 ITR 271 (SC): [1973] 2 SCC 137 the Supreme Court noted the difficulty in making an assessment ofthe escaped turnover for the purposes of levy of sales tax in the following words (headnote): \"In estimating any escaped turnover, it is inevitable that there is some guess- work. The assessing authority while making the 'best-judgment assessment no doubt should arrive at its conclusion without any bias and on rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation, It is his best judgment and not of any one else's.\" (emphasis supplied) Printed from counselvise.com 86 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT In our opinion, these principles would equally apply for deciding whether, as, in the present case, the evidence of payment of on-money in some transactions would or would not relate to all similar transactions.\" (emphasis supplied) In totality of case, it is clear that appellant has failed to verify the existence of genuine expenditure with genuine bills and vouchers and evidences regarding actual work done and failed to prove the genuineness of same with documentary evidence despite of the fact that the director of the company made commitment during search action that he will prove the genuineness of the expenditure with evidences after the search. In view of these facts, the Id. AO has rightly disallowed the impugned expense debited under the repair and maintenance. Accordingly, this ground of appeal is dismissed. 8. As the appeal of the assessee was dismissed by the ld. CIT(A), the assessee preferred the present appeal before this tribunal on the grounds as reproduced herein above. Apropos to the grounds raised by the assessee, ld. AR of the assessee filed a detailed written submission which reads as under: Brief facts of the case are that the assessee is private limited company engaged in the Transportation of “Four wheeler vehicles” throughout the country from the point of their manufacturer to the directed destinations. In the process, assessee transports vehicles of companies having manufacturing plants located in North e.g. Maruti, Honda and Tata to the dealers located in eastern, western and Southern parts of country and on return way transports the vehicles of companies having manufacturing plants located in South i.e. Hyundai, Renault, Ford etc. to dealers located in the Northern, western and eastern part. Returns of Income for the years under consideration were filed as under: Assessment Year Returned Income u/s 139 Returned Income u/s 153A APB of Vol 1 2013-14 65,33,280/- 66,49,140.00 1-6 Printed from counselvise.com 87 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT 2014-15 17,10,820/- 17,10,820/- 28-36 2015-16 - - 64-76 2016-17 - - 103-111 2017-18 - - 140-148 2018-19 8,05,86,510/- 8,05,86,510/- 181-190 2019-20 7,60,73,270/- 7,60,73,270/- 249-254 Subsequently, a search action u/s 132 was carried out by the Income Tax Department in the case of Om Transport Group, on 16.1.2019, to which assessee belongs. During the course of search, various loose papers/documents were found and seized. Also, statements of directors and employees were recorded. Various details and information as called for by ld.AOwas furnished and assessment was completed after making following disallowances: A.Y. Toll & Trip expense debited to P&L Addition on account of toll and trip expenses Repairs & Maintenance debited to P&L Addition on account of repairs & maintenance Expenses 2013-14 5,76,91,238.00 1,45,61,268.00 9,87,01,272.00 2,07,272.00 2014-15 6,73,13,408.00 1,69,89,904.00 9,71,30,783.00 2,03,974.00 2015-16 8,01,22,347.00 2,02,22,880.00 10,69,87,642.50 2,30,260.00 2016-17 7,00,41,032.00 84,39,944.00 10,25,31,553.00 63,204.00 2017-18 9,49,53,699.00 1,69,99,971.00 9,00,45,343.00 93,91,768.00 2018-19 14,33,92,485.74 2,13,65,480.00 15,20,30,774.18 3,91,87,577.00 2019-20 15,63,87,292.70 2,14,20,553.00 15,62,02,481.70 2,39,48,071.00 12,00,00,000/- 7,32,32,126/- Aggrieved of the disallowances so made, assessee preferred appeals before ld.CIT(A), which were rejected without properly appreciating the submission made by assessee. Since, disallowances on identical facts have been made in all the years, common issue wise submission is made for the sake of convenience. At the outset, modus operandi of business of assessee is explained for your ready reference. As stated above, assessee is engaged in the business of transportation of Motor Printed from counselvise.com 88 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Vehicles of companies such as Maruti, Ford, Hyundai, Renault etc. and during the course of such business, specific contracts are entered into by assessee with companies directly (& not through dealers) for specific duration and entire payment is received through banking channels from the companies after deduction of due tax at source. At the time of search, assessee owned more than 350 boxed trucks of higher capacity which are engaged in the transportation business carried on by the assessee. All the vehicles have two set of drivers along with one helper, who are remunerated by salary which is paid to them on monthly basis. All the expenses pertaining to a trip, i.e. Diesel, Toll tax, RTO expenses, other incidental petty expenses incurred on that trip are debited to Tour and trip expenses. At the time when the trip is started, a lumpsum advance is given to the driver under signed voucher to meet out the journey expenses and the authorization slips are given for topping up of diesel and fuel. For the purposes of accounting, assessee maintains Trip settlement sheets, which contain all the details of trip undertaken, right from vehicle details, i.e. ownership of vehicle, vehicle number, trip details i.e. the distance traveled, fuel Quantity / status, driver details (i.e. name, phone number, license number), advance given to driver, alongwith all the supporting evidences in respect of expenses incurred by driver, i.e. diesel slips, toll receipts, repairs bills, any other charges paid including the government payments on road. For the control purposes, the management tracks the vehicle by GPS system in place and further the particular vehicle team is supposed to show the major occurrence on road by showing face and real time photo of the matter. During the course of search & seizure action on 16.1.2019 carried out in the case of Om Agrawal group, office of assessee company situated at Cement Factory Road, Sahu Nagar, Sawai Madhopur was also searched. During the course of search, certain documents (in the nature of expenses vouchers/invoices) were also found, which were inventoried as Exhibits No. 1 to 7 of Annexure –AS. Also, statements of accountant Sh. Manish Kumar Mor and Director Sh. Om Prakash Gupta were recorded. Sh. Manish Kumar Mor, in his statements explained the entire process of accounting of transportation activity. In the process, in response to Question No.34 of statements recorded on 16.1.2019, he was required to explain as to under which head penalty levied by RTO or traffic police was recorded. In response to query so raised, it was explained by him that such expenses were recorded under “Toll and Trip Expenses” as per directions of directors. It is matter of fact that documents found in search, with regards to “Toll & Trip Expenses”, were in the nature of receipts issued by RTOs etc. mainly regarding levy of composition fees and Taxes paid by drivers during journey and few other payments made by them for on the spot settlement so as to avoid unnecessary delay in transportation. During the course of recording ofstatements of director, Sh. O.P.Gupta on 28.2.2019 (i.e. while lifting prohibitory order), has also clarified that such payments were in the nature of Composition fees and not penalties and thus are allowable in transportation business being incurred during the course of business. It is also settled position of law by various judicial pronouncements that Composition fees paid to RTO is allowable as same is of Printed from counselvise.com 89 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT compensatory nature and thus documents regarding such payments could not be treated as incriminating in nature. Also, as the receipts so found were duly recorded in books of accounts, payments for which were made out of funds available with assessee from its disclosed sources of income, i.e. earned during the regular course of business, the same cannot be termed as incriminating documents for this reason also. Similarly, at question No. 37 (APB 374 of Vol 2), Sh. Manish Mor was asked to clarify how the repairs expenses incurred by drivers en- route are recorded in books of accounts and whether they submit any bills/ vouchers for the same. In response to the same, it was explained by him that usually drivers provide bills, however at times bills are not furnished and simply added as expense in Trip Settlement Sheet (as the repairs is done by roadside mechanics, who do not keep any bill book and provide “Kaccha Bill” or sometimes bill is lost by driver) or bills so furnished are not proper, in such cases, vouchers are subsequently prepared for such amounts (i.e. expenses actually incurred, for which proper supporting documents are not furnished by truck drivers), It is pertinent to note here that in the type of business assessee is engaged in, it has to completely depend upon truck drivers in day to day business and though there is mechanism of maintaining proper invoices, still such instances are unavoidable as usually repairing services availed en-route are taken from road side mechanics, who are from unorganized sector and do not maintain provide proper invoices. It was also clarified by Sh. Manish Mor in his statements that this process was being followed for past 5-6 months only. During the course of statements of Sh. O.P. Gupta recorded on 18.1.2019 (APB 392-398 of Vol 2), i.e. during the course of search, at question no.6 and 7 (APB 394-395 of Vol 2), it was enquired, if he agreed with the statements of Sh. Manish Mor and whether statement that assessee was booking bogus expenses, on the basis of bill books of Mistris as found during the course of search was correct. Since, the search proceedings were going on since 16.1.2019, Sh. O.P. Gupta was fully exhausted mentally, Same is evident from the reply given in response to question no.7, which reads as under: iz’u&7- eSa vkidksa ,d ckj iqu% euh\"k eksj ds }kjk fn;s x;s c;ku dk iz’u la[;k 31 ls 44 fn[kk jgk gwa ftlds vuqlkj vkidh QeZ M/s Professional Automotive Pvt. Ltd. ds [kpsZ cqd djus ds fy;svkiusQthZfcycqdNiokbZgqbZgSvkSjtcmlusbuQthZfcyksa ds }kjkDysefd;sx;s [kpksZ dh tqykbZ 2018 dksfoxrrS;kj dh rksmldsvuqlkjvkiusviuhPAPL dh cqDlvkWQvdkmUVleasvkiustqykbZ 2018 ekgesadqy 26]32]720@& :Ik;s ds cksxlfcyMkysgSaAbldkLi\"Vhdj.knsoas mRrj&7 fiNysrhufnu ls esjs ?kj] t;iqjvkSjlokbZ ek/kksiqjfLFkrO;olkf;difjljksaijryk’kh o losZ{k.kdkjokbZtkjhgSbufiNys 60 ?kaVksaesadbZtxgdbZckjc;ku ns pqdkgWwlkFkghfoHkkx dh vU; dkjokgheasHkhlkFk o lg;ksx ns jgkgWwvHkheSaekufld :Ik ls FkdpqdkgWwvkSjvki }kjk dh xbZlpZesafeysdkxtkr] cqDlvkWQvdkmUVlcgqrcMhrknkneasgSftudksaiw.kZr% le>us ds fy, eq>s dqNvfrfjDrfnuksa ds le; dh t:jr gSAvr% esjk vki ls fuosnu gS fd bl dkjokgh dks iw.kZ djus ds fy, eq>s dqN le; nsa] eSa vxys ikap fnu ckn bu cqDl vkWQ vdkmUVl dks ns[kdj bu lHkh lokyksa ds tokc nsus esa [kqndks l{ke le>waxkA Printed from counselvise.com 90 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT Accordingly, in the statements so recorded, he was forced to admit the facts narrated by Sh. Manish Mor in his statements. It is pertinent to note here that no specific query whatsoever was made from Sh. O.P. Gupta regarding Toll & Trip Expenses during statements recorded u/s 132(4). It is submitted that the search in the case of the assessee was initiated on 16.1.2019 and prohibitory order u/s 132(3) was placed on 18.1.2019 night after extensive search at the business/ office premises for almost 3 days. Thereafter during the course of proceedings while revoking the prohibitory order, which took place after a lapse of more than one month, on 26.02.2019, statements of Sh. O.P. Gupta were recorded again. During the course of such statements, at question no. 6 to 8 (APB 402-404 of Vol 2), queries were raised as to whether statements of Sh.Manish Mor regarding debiting of repairs and maintenance expenses on the basis of bill books of certain mistris since past 5 to 6 months was correct. In response to this, it was categorically explained by Sh. O.P. Gupta that bill books were printed by respective mistris only and not by assessee. Moreover, it was clarified that such expenses were actually incurred and these were not bogus and rather these were such for which no proper supporting invoice was provided by truck drivers. Relevant extracts of statements referred above are as under: iz'u&6 eSavkidkscrkukpkgrkgwWfdfnukad 16-01-2019 dkseSallZizksQsluyvkWVkseksfVoizk- fy-] eSllZvkse VªkaliksVZ dEiuhvkSjeSllZthVhih VªkaliksVZ dEiuh ds lhesaVQSDVªh] lkgwuxj] lokbZ ek/kksiqjfLFkrifjljijvk;djvf/kfu;e dh /kkjk 132 ds rgr~ dh x;hryk’kh dh dk;Zokgh ds nkSjkuJheuh’kdqekjeksjiq= Jhtxnh’kizlkneksj ds c;kuntZfd, x, FksAJheuh’k us viusc;kuksaesaiz’u la[;k 37]38 vkSj 39 ds tokc es crk;kFkkfdvkidhdEiuh ls lacaf/kros [kpsZtksMªkbZoj ds }kjkfd, tkrsgSvFkokfofHkUuljdkjhdeZpkfj;ksadksHkqxrku ls lacaf/krgksrsgSmudkbanzktvkidhys[kk iqLRkdksaesafdlizdkjfd;ktkrkgSAJheuh’k us crk;kFkkfd bl rjg ds [kpksZ ds dqNfcyrksMªkbZojykdjnsrkgSrFkkdqNfcydPpsgksrsgSvFkokMªkbZojykdj ugh nsrkgSA bl izdkj ds [kpksZdkscfg;ksa es Mkyus ds fy, geusdqNfefL=;ksa dh fcycqdNiokbZx;hgSrFkk bl izdkj ds [kpksZ ds fy, fcyokmplZbUghfcycqdksa ls QkM+djcfg;ksaesa ,aVªhdjnhtkrhgSAeSavkidksJheuh’k ds c;kuksa dh izfrfn[kk jgkgwWAd`i;k bls ns[kdjcrk,afd bl ckjsesavkidksD;kdgukgS mÙkj&6 bl ckjs es eSadgukpkgrkgwafdeuh\"kus ,slkdgkFkkfd ;stksQthZfcycukdjcfg;ksaesa ,aVjdjus dh izfØ;kgS oks fiNys 5&6 eghuksa ls gh 'kq: dh x;hgSAbllsigysge bl rjg ds [kpksZ ds okmplZyxkrsughaFksA iz’u&7 fnuakd 26-02-2019 ls vkids bl ifjljijtkjhvk;djvf/kfu;e dh /kkjk 132 ds rgr~ tkjhryk’kh dh dk;Zokgh ds nkSjkuvkids bl ifjljij j[ksfoRro\"kZ 2014&15 ls pkywfoRro\"kZ 2018&19 rd dh vof/k ls lacaf/krfcy ,oaokmplZ dk lR;kiufd;kx;kvkSjik;kx;kfdvkiusviuhdaiuheSllZizksQsluyvkWVkseksfVoizkafya dh ys[kk iqLrdksaesafjis;j ,aMesaVsusalgSMesatks [kpsZ ,aVjfd, x, gSmulslacaf/krokmplZ@fcyksa ds HkkSfrdlR;kiu ds nkSjkuik;kx;kfddqN [kpksZ ds okmplZlacaf/krQkbZyesa ugh esaVasufd, x, gSvkSjtksesaVasufd, x, gSmuesa ls dqNfcyokmplZ mu QthZfcycqdksa ls lacaf/krgSftudhfcycqdvkiusghNiokdj buds fcy Loa; QkMs+ gSAvr% ykHkgkfu [kkrsesaMsfCkVfd, x, fjis;j ,aMesaVsusalgSM ds varxZrtksdqYk [kpsZMkys x, gSmuesa ls dqN ds rksokmplZ bl ifjljij ugh ik, x, gSvkSjdqNokmplZokLrfodughagSvFkokQthZgSAd`i;kmfprdkj.knsrsgq, Li\"Vdjsafdbu [kpksZdksD;ksa Uk vLohdk;Zekuktk, Printed from counselvise.com 91 ITA Nos. 809 to 815/JP/2025 Professional Automotives Private Limited vs. ACIT mRrj&7- eSavkidkscrkukpkgrkgwafdukrks ;s fcy@okmplZQthZgSvkSjukgh ;s [kpsZQthZgSD;ksfdftufefL=;ksa ls gedkedjokrsgS oks brus i
Other Referred Cases
Kabul Chawla vs. PCIT, Saumya Construction vs. ACIT, Haji Aziz & Abdul Shakoor Bros vs. CIT, Parmajit Bhasin vs. Union of India, M/s Kiran Roadlines vs. ACIT, Lift & Shift India P Ltd. vs ACIT, Shri Vishwanath V Kale vs ITO, Ocean Agro (India) Ltd. vs DCIT, M/s. Chadha & Chadha Co. vs ACIT, M/s. Agrawal Automobiles Gandhidham vs. ACIT, M/s. Taurian Iron & Steel Co vs ACIT, M/s. Chadha & Chadha Co. vs ACIT, M/s. Agrawal Automobiles Gandhidham vs. ACIT, M/s. Kiran Roadlines vs. ACIT, M/s. Lift & Shift India P Ltd. vs ACIT, M/s. Ocean Agro (India) Ltd. vs DCIT, M/s. Chadha & Chadha Co. vs ACIT, M/s. Agrawal Automobiles Gandhidham vs. ACIT, M/s. Taurian Iron & Steel Co vs ACIT, M/s. Lift & Shift India P Ltd. vs ACIT, M/s. Ocean Agro (India) Ltd. vs DCIT, M/s. Chadha & Chadha Co. vs ACIT, M/s. Agrawal Automobiles Gandhidham vs. ACIT, M/s. Taurian Iron & Steel Co vs ACIT, M/s. Lift & Shift India P Ltd. vs ACIT, M/s. Ocean Agro (India) Ltd. vs DCIT, M/s. Chadha & Chadha Co. vs ACIT, M/s. Agrawal Automobiles Gandhidham vs. ACIT, M/s. Taurian Iron & Steel Co vs ACIT, M/s. Lift & Shift India P Ltd. vs ACIT, M/s. Ocean Agro (India) Ltd. vs DCIT, M/s. Chadha & Chadha Co. vs ACIT, M/s. Agrawal Automobiles Gandhidham vs. ACIT, M/s. Taurian Iron & Steel Co vs ACIT, M/s. Lift & Shift India P Ltd. vs ACIT, M/s. Ocean Agro (India) Ltd. vs DCIT, M/s. Chadha & Chadha Co. vs ACIT, M/s. Agrawal Automobiles Gandhidham vs. ACIT, M/s. Taurian Iron & Steel Co vs ACIT, M/s. Lift & Shift India P Ltd. vs ACIT, M/s. Ocean Agro (India) Ltd. vs DCIT, M/s. Chadha & Chadha Co. vs ACIT, M/s. Agrawal Automobiles Gandhidham vs. ACIT, M
Laws Referred To
Income Tax Act, 1961
Tax Holiday Secrets for Startups
₹0
Guide to Charitable Trusts: Formation, Benefits, and Compliance
₹0
1:1 Consultation on Tax Litigation
₹1
Assignment of Registered Trademark
Mehul₹500
Affidavit - Application for condonation of delay in filing the appeal before ITAT - Type 2
Mehul₹0
Minimum Alternate Tax (MAT): Comprehensive Overview and Key Changes under Finance Bill, 2026
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Finance Bill, 2026: Key GST Reforms that will Reshape Compliance and Cash Flows
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Transfer Pricing and International Tax Reforms under Finance Bill, 2026: A Practical Overview
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